My wife and I married later in life, when I was 48 years old. This was the second marriage for both of us. We are both successful and doing well financially. Our combined net worth is approximately $3 million. When we got together, I sold my house, refinanced her house, and we bought half of her house. Her house was too big for the two of us, so after a few years, we sold it and downsized.
What's interesting is that we sold it to her son – I don't have any – at a huge discount of $100,000, based on what our neighbor's smaller, less modern house sold for right after we sold ours. The house is large for a young couple. Since my stepson and his wife have had a baby, his wife hasn't worked much and they've fallen behind on the bills.
My wife gave them $15,000 in “loans” with no expectation of repayment, but it looks like they may have to sell the house. It has certainly appreciated in value over the last two and a half years as well as the significant discount it took, so I feel we are entitled to some profit from the sale, perhaps $75,000 – recognizing the $100,000 discount it took, plus some loan repayment.
My wife is a very experienced and successful realtor. She knows the value of a house. I expect they will net about $250,000 from the sale. Am I being unreasonable or is this fair?
Stepfather
Related: I inherited $246,000 from my mother and used $142,000 to pay off the mortgage. If we divorce can I take him back?
“Is this a classic case of you questioning your decision to sell? Or have you both settled on a price that seems reasonable to friends and family?
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Dear stepfather,
I have two outstanding questions for you: When you sold the house, did you know that you were selling it at a $100,000 discount, or do you suspect that your spouse knew that they were buying the house for well below market value? If so, have you had a conversation with your spouse about this? If not, this is the person you should talk to.
The first step is to talk to your spouse about the price you sold your home for. Is this a classic case of second guessing your decision to sell? Or have you both agreed on a price that seemed like a reasonable price to friends and family, and now that you've sold, you're feeling seller's remorse? That was bad luck for you, but good luck for them.
The US housing market is a strange beast. The median home price in June 2021 was $286,728, according to Zillow Z.
By December 2023, this amount had increased by 19.5% to $342,685. In Santa Barbara, one of the hottest markets in the United States, property prices rose nearly 30% over the same two-and-a-half years, from about $1.3 million to $1.7 million.
As any real estate agent will tell you, a house can sell for $500,000 in one day, and a nearly identical home — with the help of low interest rates, a couple of hungry buyers and a lack of inventory — can sell for just an additional $100,000 in one day. after a short time. Or they may not be an exact match: it might be a corner plot, for example, with a larger garden.
What if the value of the house decreases?
So what does all this have to do with your brother-in-law selling his house for a $250,000 profit? We make the best decisions possible using the information we have at the time. If you sold this house in 2006, and he tried to sell it in 2008, would you expect the opposite to be true? In other words, I wonder if you would welcome a call from your son-in-law saying, “You sold us a turkey!”
Home values, despite the occasional housing crash, tend to rise over time, and you have other reasons to sell: You wanted to downsize two and a half years ago. Obviously, the fact that the value of the house has increased by $150,000 or $250,000 over that time will stick with you, and you now wish you had held on to it. It might be helpful to remind yourself that you, I believe, have saved on the 6% real estate broker fee.
They are selling because your brother-in-law lost his job and needs to downsize. It was a good idea to keep this house in the family, since it obviously had sentimental value to your wife, but that's not always possible. Mixing finances and family affairs often leads to hurt feelings. What if you sold the house to complete strangers? You will no longer request a reduction.
I made a deal and signed the contract. Cling to it. It would be a bad idea to go back now – as they say in corporate America – and demand your son-in-law for the $100,000 you think you are owed because you sold the house at a discount two and a half years ago. Your spouse should get $15,000 back after the sale is over. After that, all they owe you is their gratitude.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
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Previous columns by Quentin Fottrell:
“I don't like the idea of dying alone”: I'm 54, twice divorced and have $2.3 million. My girlfriend wants to get married. How do I protect myself?
“If I say the sky is blue, you'll tell me it's green”: My 19-year-old daughter will inherit $800,000. How can she invest in her future?
“They don't have running water”: Our neighbors are constantly beating us for money. My husband gave them $400. Is it selfish to say no?
