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A Couple of Stupids, A Greedy Spouse and a Delusional Son Walk Into a Banků
Dear Mr. Berko: Our 39-year-old son lost a $135,000-a-year job as a civil engineer more than three years ago. He recently found another job, but it only pays $53,000. He hopes to get a better paying job next year.
Prior to losing his job, he and his wife were looking to buy a beautiful home for $795,000. Thank goodness they did not. Since losing his job, he has used up all savings for rent, auto payments, credit cards, various bills, insurance and a deserved six-week vacation for him and his wife. We helped them pay off some of the bills, made both car payments and helped with private school tuition.
Now, he is working again, and the beautiful home they were looking at years ago has not been sold, and the asking price is down to $497,000. My wife and I would have to co-sign on an existing 5.75 percent, 20-year private mortgage for $443,000, and my son's in-laws would lend them the $54,000 down payment at 4.0 percent with a 20-year payout.
The sticking point is that my daughter-in-law of nine years, who doesn't work, will not sign the mortgage unless we also invest $54,000 just like her parents did. Our son doesn't think this is a big deal and agrees with his wife that we should also invest $54,000. Even though the home is a very good price and we can afford the $54,000, do you think this is fair? And how important is it (legally) that our daughter-in-law sign on the mortgage? — SS in Columbus, Ohio
Dear SS: Wow! You guys really take the cupcake, or should I say the fruitcake?
Family members are the worst folks in the world to lend money to, especially daughters, cousins, aunts, uncles, sons, second cousins, nieces, nephews and in-laws of all stripes, though not necessarily in that order. It's kind of like lending money to an ex-spouse who has a feeling of entitlement, but when the dollars come due, there's no feeling of obligation. For some reason, it's much easier to renege on a promise to pay a relative than a stranger. Most folks have a nasty story to tell, and the courts are chock-full of broken familial promises.
But are you smart enough to recognize that in 2008 your kid couldn't afford a $795,000 home on an income of $135,000 with house payments of at least $7,000 a month? And it seems you're still not smart enough to realize that your kid can't even afford a $496,000 home.
No father wants to be told that his son is delusional and a fool. However, I doubt your kid will ever make $135,000 a year again. Our national income is declining, and so is our national standard of living, and so are our personal expectations. As I wrote a couple of years ago: "Very few of today's youngsters will earn as much or more than their parents, so it's downhill slowly from here."
Frankly, you and your wife are a couple of "stupids" to co-sign a mortgage. And considering the crankiness of the economy, your kid may be jobless again in a few years, and you'll be stuck with his mortgage payments. It's also a good wager that your kid and his scold will outspend themselves once again. You've become an enabler to a 39-year-old who does not understand discipline and responsibility.
I'm not familiar with Ohio statutes, so I can't answer the question about Ohio mortgage law and your daughter-in-law's signature. If you must co-sign, perhaps you could contribute $27,000 of the $54,000 down payment, providing your son's in-laws also co-sign the mortgage. And if they do, perhaps your son's spouse would then be willing to sign the mortgage.
Meanwhile, don't be quick to approve of that home's price. If it's been on the market for three years, the price is still too high There's no other reason. There are 11,000 homes for sale in Columbus with an average listing price of less than $120,000, and the average home has been on the market for 169 days. In 2011, home prices in Columbus fell an average of 4.6 percent in value, and some Realtors believe they could fall another 4 percent to 6 percent this year.
While unemployment rates in Ohio have declined, there are still more people unemployed in Ohio today than there were a month or six months ago. The percentage of unemployed is lower only because the tens of thousands of folks out of work have stopped looking for employment and are no longer counted among the numbers of unemployed. There are actually fewer folks working in Ohio today than last year. It seems that Ohio and the federal government do not practice "truth in government or advertising."
So, with fewer folks employed, there are fewer people to buy homes, which means that home prices in Columbus may continue to fall.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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