Tuesday, March 13, 2012

Different in the Neighborhood

Ann plans to obtain the lifetime right to live rent-free in her daughter Letty’s home in exchange for building an addition onto the home. 

After Ann’s death, Letty will not have to ‘pay back’ any of the money Ann paid to build the addition.  Ann is doing this for her own benefit after her recent stroke, not for Letty. 

Plus, Ann knows that whenever Letty decides to sell her home, the addition will likely not be worth as much as it costs to build.  Why?  Because lenders require appraisals to support the purchase price to be paid by their borrower, and the addition will make Letty’s house ‘too big’ for the neighborhood. 

When Letty’s house is too much bigger than all others in the nearby areas, it will be difficult to find comparables that are similar enough to fully take into account the addition.

Similarly, Ann is planning to have the addition area made handicapped accessible, plus retrofit other parts of Letty’s home too, which can be pricey.  No other neighborhood homes have that feature. 

Although accessibility may make the home more attractive to certain buyers, in the current market it will likely not increase appraisal value as much adding the feature will cost in light of the limitations of standard comparative appraisal analysis.

Moving forward into multi-generational living concerns both practical and legal issues.  For help deciding whether or how to plan your own multi-generational living arrangement, call our office at (815) 436-1996 to set an appointment.  ©2012 Gruber Law Office, Ltd.


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