Good idea to take out reverse mortgage with bank not son

Q: My house is free and clear, and I’d like a little extra money. I thought my son could lend me money on a reverse mortgage. In the end, the house would be his and could be sold to recoup his investment. In the institutionalized version, the bank gets the house (plus a lot of extra fees and such) and my son and other children end up with nothing. I must say no one likes my idea, but I don’t understand why not. — S.C.

A: No one likes the idea because financial arrangements within a family can lead to problems, especially if you have other children. Arranging a reverse mortgage with a regular lending institution is more prudent. Yes, you’ll spend more on closing costs, but you don’t actually lay out that money now. It’ll be added to the debt, along with the money you receive every month and interest.

The bank doesn’t get the house when you die or move out. Yes, often the house is sold at that point, but anything left over after the mortgage payoff belongs to the heirs.

Who Owns the House on our land?

Q: My husband and I have a home that sits on three acres. His parents put their home on our property more than 20 years ago. His dad has died, and his mom is ill. We’re wondering how to sell our property when we don’t own her home but it sits on the property. — askedith.com

A: The general rule is that if you own the land you own anything built on it. It’s always possible, though, that some other legal arrangement was made when his folks’ house was built. If it’s a mobile home, it may make a difference whether it’s on a foundation or not.

It’s time to have a lawyer find out where you stand.

There is a Danger of Over-Improving

Q: I watch lots of home improvement shows and at the end they always tell how much the improvement raised the value of the houses. It usually is $10,000 to $50,000 or more. But Realtors always look at recent home sales and base the value price on square footage. There can be a great disparity between the two.

I have a small ranch that I purchased almost new a few years ago. Since then, I have spent a considerable amount of money remodeling it. I plan on living here as long as I can, so I basically made the house the way I wanted it.

There is a comparable house a few doors down that has done nothing much to it. It is actually assessed a little higher than my house. If both were listed for sale at the same time, couldn’t I expect to receive a much higher offer since I have granite counters, hickory floors, a whole house generator and large patio? — M.B.

A: Your house would certainly sell first, and for somewhat more money than the other one, but I doubt the price would be “much higher.” In general, people will spend only a certain amount to live in a certain neighborhood.

I’m glad to hear you plan on living there as long as you can, because that’s the best reason for making improvements: your own enjoyment.

I doubt if those television shows put all that updating effort into properties that are, as yours was, nearly new. In general, almost no renovation can be expected to increase value by the amount spent. The best investment is probably updating kitchens and baths, but even then, if a house becomes the most expensive on the street, sellers can’t expect to get their money back. Buyers with that much to spend probably want to live somewhere else. People are just like that.

Edith Lank will respond personally to any question sent to www.askedith.com.