Home owner wants to sell but sister has life estate

12 Replies

I am wholesaler/ investor in the Cleveland area. I was contacted by a gentleman that wants to sell his house.  The problem is his sister lives in it and she has a life estate on the property.  During my google search this means she can live in it till she dies. 

He says this home is well kept in a nice area of a city called Brooklyn. 3/1.5 finished basement. His parents took out a 50K HELOC about 4 years ago, which is only debt on the property that is 140k on Zillow.

He didnt give me a number but he he just wants to cash out his ownership and let the investor deal with his sister. Is there anything I can do?  What questions should I be asking?

How old is she and what is her life expectancy. Until she dies she is very likely not leaving. Who ever owns his half will have to wait till she dies and then deal with whomever inherits her portion.

You will need to persuade the sister to sell as well.

Unless she’s in her 80s you’re probably looking at a multiple decade occupancy here. Is she paying rent? Hard to believe anyone would buy a house with a tenant you can’t get rid of who isn’t paying rent

The value of the property with the life estate situation is significantly less than the value of the property with a clear title. Basically the buyer would be getting a property with a significant encumbrance that does not get removed with the purchase. The buyer is getting ownership, but not possession. Possession only comes when the sister dies or decides to move out. That delay creates a discount. If the sister is on her deathbed (sorry to be morbid) the discount would be fairly small. If the sister is young, healthy, and has stated she's not leaving the discount would be significant. A way to get a handle on this discount would be to ask the sister flat out "how much money would it take for you to move?"

Thank you all for your replies. I just looked the sister up and it shows she is 42. Pulled up the county records and both names are on the deed. The transfer just happened a week ago. I will need to get the sister to agree to sell. The brother made it sound like the sister didn't have ownership. Until I get the sister on board this is a dead deal, correct?

So interesting...I didn't know this could be done. So he's stuck with half the expenses but can't get anything out of it until she dies? Lousy deal. Can he even take his name off the title if he doesn't want to be on it anymore?

Now if she is a healthy 42 she is holding onto a considerable asset. Rent free living until she dies....... May want to see if she has a profile on a dating site!

Wow @Mindy Jensen that was a great article. I walked away from that property. The owner (remainderman) was bitter and trying to figure out a way to cash out behind his sisters back. He actually inherited the property from his dad. Years later he gave it to his mom. The mom got sick and his twin sister with the help of other relatives convinced the mom to give her a life estate since she was living there. His sister inherited other property which she sold. It was an interesting learning experience for me crappy one for this dude.
Originally posted by @Thomas S. :

How old is she and what is her life expectancy. Until she dies she is very likely not leaving. Who ever owns his half will have to wait till she dies and then deal with whomever inherits her portion.

You will need to persuade the sister to sell as well.

 He likely won't need to persuade the sister to sell as long as he can find a buyer willing to buy the interest *subject to* the sister's life estate. (assuming there's no state law that gives a life tenant veto on a sale) Usually, best thing to do in this scenario is to talk to the sister and see how much money she would take to give up her life estate. Then you can structure your wholesale with a portion of the sales price going to the fee owner, and a portion going to the life estate holder. And you keep your markup between first contract and second contract. I'd talk to a RE attorney in your jurisdiction and see what they think