Can your sister force the sale of a home?
The first thing to look into is whether your sister has the legal right to force the sale of a home — and the answer is that it depends.
If your mom and dad co-owned the home, your mom's share may have passed directly to your dad. If they were joint tenants with the right of survivorship, your dad would automatically inherit your mom’s share and your sister has no legal interest and can't force a sale.
With some other ownership structures, like tenants in common, your mom could have left her share of the home to whomever she wants.
Likewise, if your mom was the sole owner, she could also give ownership to your sister in her will. If that's the case and she made you, your father and your sister co-owners, your sister could use a process called a partition action to force the sale of the property. On a sale, you'd get your share of the home's sale price. This is true as long as your mom's will didn't give your dad a life estate, or the right to remain in the home for the rest of his life.
Discover how a simple decision today could lead to an extra $1.3 million in retirement
Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.
Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.
Read MoreWhat if your sister has the legal right to force a sale?
If your sister has the legal authority to force a sale, you'll have to try to work out a compromise with her so she doesn't exercise that right. You could do this on your own or with the help of mediators.
One option you have is to buy out her interest. You'd get the home appraised to find out its value and purchase her share. You might need a mortgage to pay her outright and give her a lump sum of cash, or you could make legal arrangements to pay her over time if she agrees.
Mortgage rates have been rising despite the Federal Reserve beginning its rate-cutting cycle. Rates are in the 6-7% range so you'd need to make sure the purchase is affordable for you.
Home prices have also skyrocketed in recent years due to low supply, but experts predict they'll continue rising even if mortgage rates fall since that will increase demand. If you can afford to, buying your sister out and becoming the home's sole owner may not be a bad idea — especially since you can refinance later and will hopefully begin benefitting from property appreciation. However, markets cannot be predicted with any certainty and the opposite could happen, so there is always a risk.
If you can't or don't want to buy your sister out, selling outright may be your best option to avoid ongoing financial stress. You could offer to pay her rent for her share of the home, such as a third of the fair market rent since you and your dad are both living there, but she may not agree. You don't generally want to allow her to borrow against the home, though, as if she doesn't pay, that becomes your problem because the house could be foreclosed on.
Ultimately, you must find out what her legal rights are under your mom's estate plan. If you find she has an ownership interest, decide if it makes sense to sell, buy her out, or work out another arrangement — with the knowledge that continuing to intertwine your finances may be an ongoing source of stress if you can't agree on financial issues related to your mom's estate.
The richest 1% use an advisor. Do you?
Wealthy people know that having money is not the same as being good with money. Advisor can help you shape your financial future and connect with expert guidance . A trusted advisor helps you make smart choices about investments, retirement savings, and tax planning. Try Advisor now.
