How Parents Are Helping Their Adult Children Buy Homes Today: ‘We Own 25%, Mom and Dad Own 75%’

by Garcia Chris
10 minutes read
How Parents Are Helping Their Adult Children Buy Homes Today: ‘We Own 25%, Mom and Dad Own 75%’

Leslie Sherman was resigned to being a renter the rest of her life.

The 33-year-old couples therapist and her husband, Conrad Useldinger, 30, a dance academy director, live in San Jose, CA. Nestled in the heart of Silicon Valley, where Apple, Google, and Nvidia are based, it is the most expensive housing market in America, according to a Realtor.com analysis. There, the median home list price hovers around $1.46 million—and homebuyers need to earn at least $361,000.

“We didn’t have plans to buy a place because it was not going to be financially feasible for us,” she says. “So we were going to rent indefinitely.”

But, that’s when Mom and Dad stepped in.

“My husband and I started investing in Silicon Valley real estate in the early 1980s,” says Kathy Fitzgerald Sherman, a retired lawyer. “We benefited greatly from the explosion in real estate values, which also made it impossible for our kids to purchase real estate on their own. Our decision to help them was a ‘pay it forward’ kind of action.”

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In February, Kathy and her husband, Michael Sherman, helped Leslie and her husband close on an $850,000 condo. All four of their names are on the deed: Leslie and her spouse own 25% of the property, while Kathy and Michael own 75%.

Here’s how this unusual deal came together, along with the pros, cons, and other considerations that homebuyers (and their parents) might want to know.

Conrad Useldinger and Leslie Sherman in front of their new condo

(Leslie Sherman)

Why parents are pitching in to help their kids buy a home

While turning to Mom and Dad for help buying a home is an age-old practice, today’s high-priced housing market has made it a growing necessity.

Although San Jose’s million-plus list prices are at the high end of the spectrum, they aren’t all that unusual. The national median list price currently hovers at $424,900, according to the latest Realtor.com data. Mortgage rates are high, too, passing the dreaded 7% threshold in April.

In a new study by Intuit and Credit Karma, 38% of Gen Z homeowners say they received financial assistance from their parents to buy a home. It also helps that boomers tend to be a wealthy generation, whereas their kids are often saddled with massive student debt, making it hard to enter the housing market.

“Even with zero-down payment programs, high home prices and interest rates can put buying a home out of reach without help,” says real estate agent and attorney Bruce Ailion, of Re/Max Town and Country in Alpharetta, GA.

The Shermans helped both of their kids purchase their first home, and see the money they’d invest as an advance on their inheritance. But in both cases, they did so carefully.

Michael Sherman and Kathy Fitzgerald Sherman helped their daughter, Leslie, and her husband close on an $850,000 condo.

(Leslie Sherman and Conrad Useldinger)

The two generations sat down to craft a “shared equity” deal. (You’ll sometimes hear this called, humorously enough, a “rich uncle” arrangement.) Based on their income, they figured out how much the young couple could afford to pay monthly. Next, they worked backward to determine what size mortgage the young couple could handle. The parents stood ready to pay the rest.

Once they had an estimate of what price house they could afford, they were off to the house-hunting races, which they did as a team.

“Since we’d had experience buying several properties in the area, we went with them, pointing out plusses and minuses,” says Kathy. She admits that she didn’t give them carte blanche to choose just any place.

“But we were sensitive to their feelings and wanted them to love what they purchased,” she explains.

House hunting as a family

At first, they checked out houses in the Los Gatos Mountains, but the maintenance costs seemed too much.

“They were in our budget, but I absolutely hated them,” admits Leslie. “They all required some amount of work right out the gate, and I did not want my future to be filled with endless home improvement projects. That is just not the life I had envisioned for myself.”

Their attention then turned to condos, and they found one they really liked—and that her parents liked, too. It was a two-bedroom, two-bath with a spacious kitchen, office space in the primary bedroom, and in-unit laundry (at the top of Leslie’s wish list). Also part of the package were killer amenities, including a pool, hot tub, playground, and beautiful gym.

“We decided to make an offer the very next day, before others came in,” says Leslie.

Where Leslie Sherman and her husband decided to buy property

(Realtor.com)

The condo came with great amenities like a swimming pool.

(Realtor.com)

The deal this couple could offer was strong: With her parents’ backing, Leslie and her husband could offer all cash if needed, with no contingencies. They snagged the property for $850,000 ($5,000 below asking price).

At closing, her parents ponied up $650,000 in cash, leaving Leslie and Conrad with a $200,000 mortgage—$1,297 a month at a 6.75% interest rate. Leslie and Conrad also pay property taxes, homeowners association fees (currently $465 a month), and maintenance.

“We pay for all repairs,” notes Leslie. “But if there are ever any major upgrades, we could split the cost. Under their arrangement, it would be in the same 75% versus 25% proportion.”

Get it in writing

All of these details were written up in a rock-solid legal agreement, which is exactly how you want to do this to protect all involved—no casual “pinky swear” kind of deals allowed. Such arrangements need guardrails.

“The best way to make sure bad feelings don’t arise is to have a contract,” explains Kathy. “If there ever is a disagreement about how to handle something, we can just look in the agreement.”

There are infinite ways to structure investing in a home for a child, Ailion notes. For instance, when the property sells, the parents might get their money back plus interest. This interest could be similar to what their funds would have earned if they had been sitting in the bank. Or, if the child is making the interest payments and maintaining the home, they might want to negotiate a bigger cut of any gains in the property’s value.

For most families executing this kind of deal, a lawyer will be necessary. Because Kathy is a retired lawyer, she jumped in, buying a boilerplate equity-sharing agreement and modifying it to suit their needs.

“In theory, anyone can do this,” she notes. “Since I am an attorney, I was particularly comfortable doing that.”

But what about that old saying “Never do business with friends or relatives”—does it apply here? Can it all backfire? Not for the Sherman clan so far.

“We haven’t had any issues,” says Leslie. “My parents are not controlling, but that’s not the case with everyone’s parents. To avoid problems, you would definitely want the contract to spell out how decisions about changes to the home will be made. That’s especially important if there are disagreements.”

And the upside of doing this kind of deal right is tremendous.

“I know that without this arrangement, we wouldn’t be able to get into the housing market in this area,” says Leslie, “so we are really very lucky.”

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Leslie and her husband preferred a condo over a stand-alone home.

(Realtor.com)

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