Dear Quentin,
My wife and I married later in life, at 48. It was the second marriage for both of us. We are both successful and doing well financially. Our combined net worth is about $3 million. When we got together, I sold my house and we refinanced her home, with me buying half of her house. Her house was way too big for the two of us, so after a few years, we sold it and downsized.
The kicker is we sold it to her son — I have no children — at a substantial $100,000 discount, based on what our neighbor’s smaller, less up-to-date house sold for right after we sold ours. The house is a lot for a young couple. Since my stepson and his wife had a baby, his wife has not been working much and they’ve fallen behind on bills.
My wife has given 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 on top of the steep discount he received, so I feel like we are entitled to some of the profit from the sale, perhaps $75,000 — recognizing the $100,000 discount he received, plus some loan repayment.
My wife is a very experienced and successful Realtor. She knows what the house is worth. I expect they will net about $250,000 from the sale. Am I being unreasonable, or is this fair?
The Stepfather
“Is this a classic case of second-guessing your decision to sell? Or did you both settle on a price that seemed like a reasonable friends-and-family rate?”
MarketWatch illustration
Dear Stepfather,
I have two outstanding questions for you: When you sold the house, did you know you were selling at a $100,000 discount, or do you suspect that your wife knew they were buying the house significantly below the market value? And, if so, have you had a conversation with your wife about this? If not, that’s the person you should be talking to.
The first step is to talk to your wife about the price at which you sold your home. Is this a classic case of second-guessing your decision to sell? Or did you both settle on a price that seemed like a reasonable friends-and-family rate and, now that they are selling, you’re having seller’s remorse? That was bad luck for you, but good luck for them.
The U.S. housing market is a strange beast. The average price of a home in June 2021 was $286,728, according to Zillow
Z,
By December 2023, that had risen by 19.5%, to $342,685. In Santa Barbara, one of the hottest markets in the U.S., property prices have risen nearly 30% over those 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 one day and an almost identical house — helped by a fall in interest rates, a couple of hungry buyers and a lack of inventory — can sell for $100,000 more just a short time later. Or perhaps it’s not quite so identical: It may be a corner lot, for instance, with a bigger garden.
What if the house had depreciated in value?
So what does all of this have to do with your son-in-law selling his house for a $250,000 profit? We make the best decisions we can with the information we have at the time. If you had sold him this house in 2006, and he attempted to sell it in 2008, would you expect the reverse 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!”
House values, notwithstanding the occasional housing crash, tend to appreciate over time, and you had other reasons for selling: You wanted to downsize two and a half years ago. The fact that the house value has increased by $150,000 or $250,000 over that time obviously sticks in your craw, as you now wish you had held onto it. It might help to remind yourself that you, I assume, saved on the 6% real-estate broker fee.
They’re selling because your son-in-law has lost his job and needs to downsize his life. It was a nice idea to keep this house in the family, given that it obviously has sentimental value to your wife, but that’s not always possible. Mixing finances and family often leads to hurt feelings. What if you had sold the house to complete strangers? You would not ask for a cut then.
You made a deal and signed the contract. Stick to it. It would be bad form to now circle back — as they say in corporate America — and hit up your son-in-law for the $100,000 you believe you are owed because you sold the house at a discount two and a half years ago. Your wife should get her $15,000 back after the sale goes through. 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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