My family and I live in my parent’s home. Dad died about a month ago. House is in a trust and I’m the trustee. There are two other sibs that have a share in the house. House has a reverse mortgage, but has about $200k+ in equity. The other subs live out of state and will never occupy the house. I’m hoping they will take their money and run when the house is sold. I spoke with the trust attorney and he said I sell the house ASAP, but to keep a slush fund until the trust is closed. Legal notices will go out to the heirs in a few days and they have a time limit to contest.

So my dilemma: should I buy out the other heirs and keep the house as a rental? I’m guessing the reno cost would be $100k House was built in 70’s —popcorn ceilings, velvet wall paper, etc. House is 2500sf. Comps in the area are $545k, with about half the square footage. Inventory is low in CA, so that’s why I may want to keep it.

First of all, I'm sorry for your loss. Went through it in 2013 with my surviving parent. I assume since no mention of mom, that she's no longer living or not a part of this situation? Definitely sell it. Here's why.

1. If you buy them out, no matter how much over list you pay them, they'll feel that you've cheated them of their inheritance, especially if that home is a profitable rental. I could see them burning through their cash, and looking at your profitable rental and resenting you for it or thinking you owe them or took advantage of them. Best to do everything equally if you want to enjoy another Thanksgiving or Christmas family gathering.

2. Dealing with reverse mortgage means you'll probably pay top dollar for it. Also complications from the clouded title due to reverse mortgage.

3. It's your family home. The last thing you want to see is renters tearing up your memories.

4. Since you're personally attached to the home, you'll probably spend more fixing it up than you would a house you're not emotionally connected with.

5. Estate taxes. If you sell it before settling the estate taxes, you can use sales value as the tax value since it then becomes a pile of cash. If you keep the house, you'll have to have it appraised and pay based on appraisal, even if that appraisal is higher than you sell it for. Why spend extra estate tax dollars if you don't have to.

I agree that reverse mortgage is probably going to be a problem. How much is owed back on that? I also agree that emotions attached to a rental is going to hurt. People who rent the house that used to be their home have too many expectations and emotions attached to it. Rarely does that go well.

The big question is how much will you have to pay for this house (buying out the siblings and paying the reverse mortgage), plus consider your portion as well and the improvements. Would you pay that for the house to have as a rental??? Would the rents justify the cost? Take your emotions and possible inheritance factors out of it. You might also run into issues years from now with the other siblings as LL of the Flies said. Are you willing to risk that?

I know this situation well. Many of my friends with siblings play hard ball. One example a property was worth $250,000. But it needed $20,000 in repairs before it could be sold and get financing. Then there is a 6% broker sales commission, escrow and closing cost of 2%. This means if they fixed up the property and paid the sales load, out of $250,000 -- they would be lucky to net $210,000..

So one sibling offered to their brother and sister a purchase for $220,000. The brother and sister said, "We want the full price, $250,000". So I told my friend to walk away.

After interviewing 5 realtors the brother and sister didn't have the funds or ability to fix the property, but a sale as is would have gotten only $195,000.

So the brother and sister said after three months, "We Will take the $220,00". I told my friend to tell their family that your first offer was rejected and your new offer is $210,000, still more than $195,000. They agreed on a quick purchase for $200,000 -- that's $66.7K to the brother and sister.

Sorry for your loss.

I agree with others to be careful of reverse mortgage and family matters may arise.