Buying out a sibling's share of an inherited family home
BoAnthony42
this is done and if and where an attorney's assistance is needed in
the process?
Also, if anyone has had experience with assisting with such buyouts,
have you noticed whether the siblings have been able to explicitly
agree on figuring into the lack of the need to pay real estate agent
commissions into the money that changed hands? For example, say the
siblings had an independent appraisal of the home find that the
house's market value is $1,0000,0000. Let's say the typical agent
commission in the area of the house is 6%. Then, the sibling buying
out the one other sibling pays $470,000 (half of the market value less
the typical commission).
Thanks in advance for any information that can be provided.
Rich Carreiro
> agree on figuring into the lack of the need to pay real estate agent
> commissions into the money that changed hands? For example, say the
> siblings had an independent appraisal of the home find that the
> house's market value is $1,0000,0000. Let's say the typical agent
> commission in the area of the house is 6%. Then, the sibling buying
> out the one other sibling pays $470,000 (half of the market value less
> the typical commission).
Why on earth would a real estate agent be involved here in the
first place? The point of an RE agent is to find a buyer and
bring him together with the seller, and also to help the seller
negotiate for the highest price.
How does that relate to one sibling buying out the other sibling's
share? All that needs to happen is for Sibling A to give Sibling B
$500,000 and for Sibling B to sign off on a deed granting his interest
in the property to Sibling A.
Now, you're probably going to want a lawyer involved to make sure
the paperwork is drafted/executed/recorded properly. And if
the sibs don't trust each other, they may each want their own
lawyer. But I don't see how an RE agent figures into this.
--
Rich Carreiro rlc...@animato.arlington.ma.us
Stuart Bronstein
> Can anyone point out a book or an Internet article that
> outlines how this is done and if and where an attorney's
> assistance is needed in the process?
The topic is much to broad to be addressed in answer to your question.
The answer in your specific case will depend on the laws of the
state you live in, and how you hold title (joint tenants, tenants in
common, beneficiary of trust, etc.).
> Also, if anyone has had experience with assisting with such
> buyouts, have you noticed whether the siblings have been able
> to explicitly agree on figuring into the lack of the need to
> pay real estate agent commissions into the money that changed
> hands? For example, say the siblings had an independent
> appraisal of the home find that the house's market value is
> $1,0000,0000. Let's say the typical agent commission in the
> area of the house is 6%. Then, the sibling buying out the one
> other sibling pays $470,000 (half of the market value less
> the typical commission).
A partition (which is what this would be called if you ask a court's
assistance to make this happen) is an equitable proceeding. That
means that each owner must be treated "equitably".
I am not aware of any court cases on this topic (I've looked in
California cases recently but found none), but it seems to me that if
no broker's commission need be paid, each sibling should benefit
equally. That is, that the commission that would be paid should be
divided in half, with the buyer and the seller each receiving credit
for half.
Stu
Christopher Green
news:<71d9i0dtv9v6rt96c...@4ax.com>...
You can negotiate this sort of thing pretty much any way you want. So
long as the parties are in agreement, there should be no objection to
the sale. But it's not uncommon that one of the parties wants to be
stubborn about it. (The more siblings that share ownership, and the
older they are, the more likely somebody will be stubborn and hold up
the deal for months or even years.)
You could argue it either way. The seller is getting so much as he
would have gotten in a full-commission sale anyway. But the buyer is
getting a windfall, and you could just as well argue that it is fair
to share it with the selling sibling.
--
Not a lawyer,
Chris Green
Gene E. Utterback, EA
news:71d9i0dtv9v6rt96c...@4ax.com...
IANAL, and I don't have any articles or sites to point you to, but I would
like to offer some basic information that should be of some help.
1 - Ignore the sibling relationship, it has very little to do with being
fair;
2 - the nicest thing about contract theory is that pretty much anything that
isn't illegal that is agreed upon by the parties, where a meeting of the
minds takes place, is pretty much OK.
You and your sister, or you and I for that matter, could have inherited a
piece of property. Perhaps one or both of us wants to keep the property.
Generally speaking the one who wants it more has to offer the one who wants
it less sufficient incentive to let go. If both parties want it badly
enough, a partition suit can be brought, the property sold, and proceeds
split - that way neither get the property, but both get their share of the
proceeds.
Also, just because a transaction takes place without an agent doesn't
necessarily justify an adjustment to the sale price. For example, if you
wanted to buy me out I could just as easily argue that I want half of the
FMV or $500K and that I'm entitled to the full amount because if WE can't
agree than WE have to sell and we will both be shorted the agent's fee. I
could also insist that I want $500K AND that you are pay all the costs
associated with the transfer including the taxes, attorney's fees,
settlement costs and etc. because after all you are getting a $1M property
for only $500K. Or I could insist on whatever terms I wanted to insist on.
Remember, the key here is that there has to be a meeting of the minds, a
mutually understood and agreed upon transaction. And as long as that
transaction doesn't include anything illegal it can be whatever we agree it
will be.
Gene E. Utterback, EA
Paul Cassel
> Can anyone point out a book or an Internet article that outlines how
> this is done and if and where an attorney's assistance is needed in
> the process?
>
It won't hurt to get an attorney involved if the house is really worth a
million. In fact, I'd recommend it even if the house is worth much less.
Lawyers are a PITA for many, but this is something you want done right.
To answer your question directly, there is no standard way to do this or
a standard method to calculate equities. It's all up to the parties
involved. The easiest way to accomplish this, given that I have no facts
I'm just throwing something out here, is for the parties to create an
escrow. The buyer party puts in to the escrow the amount agreed upon for
each party's equity. The seller(s) put a quit claim deed into the
escrow. When all elements are in escrow, the escrow agent will distibute
the escrowed items according to the terms of the escrow.
If you wish to do an Internet search, try Teoma or whatever you use and
search on "escrow" and "quit claim deed".
-paul
ianal
Michael Jacobs
Why would you subtract the commission from the deal if there's no
agent involved? A 50-50 split means 50-50, not 47-53. The selling
sibling's share is worth half of the market value of the house,
period.
Don't try to screw your sibling in a voluntary deal, or else he/she is
likely to go to court to force a partition sale in which the sheriff
will auction the property to the highest bidder on the court house
steps. You will both get screwed since you will not get anywhere near
the actual market price in a judicially forced sale. That fact
probably won't make any difference to your sibling, since you're
planning to screw him/her anyway, and he/she figures it's better to
get screwed by a stranger. Be fair, and you both come out ahead.
--
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal
matter.
For confidential professional advice, consult your own lawyer in a
private communication.
Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685 (fax) 410-740-4300
Robert Bonomi
Michael Jacobs <mjaco...@comcast.net> wrote:
>bot...@talk21.com (BoAnthony42) wrote in message
>news:<71d9i0dtv9v6rt96c...@4ax.com>...
>> Can anyone point out a book or an Internet article that outlines how
>> this is done and if and where an attorney's assistance is needed in
>> the process?
Comment: This is really more an 'accounting' matter than a legal question.
The first thing you need is *GOOD* data on _all_ the 'actual' _seller_
expenses involved in a 'normal, arms-length' sale of a property in your
locale, in the price range of your property.
And a separate itemization of the expenses incurred in an 'in-family' sale.
The actual 'sales contract' =will= probably require the services of an
attorney to draw it up; Many of the clauses in the 'industry standard'
contract will -not- be appropriate/relevant, and you may need some language
specific to your situation inserted.
A real-estate agent should be able to provide most of the data. So can a
'real estate closing specialist'. Also, an attorney specializing in real-
estate transactions. A good accountant, with real-estate and taxation
specialization, can also be a big help.
>> Also, if anyone has had experience with assisting with such buyouts,
>> have you noticed whether the siblings have been able to explicitly
>> agree on figuring into the lack of the need to pay real estate agent
>> commissions into the money that changed hands? For example, say the
>> siblings had an independent appraisal of the home find that the
>> house's market value is $1,0000,0000. Let's say the typical agent
>> commission in the area of the house is 6%. Then, the sibling buying
>> out the one other sibling pays $470,000 (half of the market value less
>> the typical commission).
>>
>> Thanks in advance for any information that can be provided.
>
>Why would you subtract the commission from the deal if there's no
>agent involved? A 50-50 split means 50-50, not 47-53. The selling
>sibling's share is worth half of the market value of the house,
>period.
The argument _can_ be made that the 'value' is 1/2 the 'net proceeds'
of a sale of the property. Which is not the same as 50% of the 'list
price' (or 'appraisal value') thereof.
*IF* If one sibling buys the other out for the 500k portion of the $1M 'list'
value, and then -- due to unforeseen circumstances 3 months later -- has to
turn around and sell the property, _and_ manages to sell it for 'list',
he's going to net somewhat _less_ than 940k, on an open-market, broker-
assisted sale. So his _original_ "half", apparently had a 'net' value of
under $440k, since he paid $500k for the other *equal* (??) "half".
>Don't try to screw your sibling in a voluntary deal, or else he/she is
>likely to go to court to force a partition sale in which the sheriff
>will auction the property to the highest bidder on the court house
>steps. You will both get screwed since you will not get anywhere near
>the actual market price in a judicially forced sale. That fact
>probably won't make any difference to your sibling, since you're
>planning to screw him/her anyway, and he/she figures it's better to
>get screwed by a stranger. Be fair, and you both come out ahead.
The truly _fair_ way is to do a *real* cost-accounting. The property
has a 'market' value, which can be estimated from the selling (not listing)
prices of 'comparables'.
There are also a bunch of 'unrealized expenses' associated with the
ownership of the property. e.g. agent-commissions on a broker-assisted
sale, closing costs, title transfer fees, title 'insurance' if appropriate
in that venue, attorney review, etc., etc., ad nauseum.
You look at _all_ those costs in an 'arms-length' sale to an unrelated party.
Many of those items _are_, however, treated differently in an 'in-family'
sale between joint owners. So you need an itemization of the differences.
If the property, still in joint ownership, was sold to an unrelated property,
each of the joint owners would receive 1/2 the selling price, *LESS* the
previously 'unrealized' (now *realized*) expenses of ownership. This is the
'net proceeds' of the sale.
It is *very* arguable that a "fair" treatment of an 'in-family' sale
between joint owners, that the 'seller' should realize *exactly* the
same 'net proceeds' as outlined above. This means that the 'gross'
pay-out to the seller would be the '1/2 the theoretical net proceeds'
*plus* any 'actual' expenses incurred in the in-family sale. In this
situation, the "buyer" is, _in_effect_, picking up expenses that would
normally be the seller's responsibility. Essentially, this is a 'premium'
over market value -- it is, simply, the price paid to have 'undivided'
ownership of the property. The seller reaps no benefit from that undivided
ownership, so there is no rational reason for the seller to be burdened
with any of that expense.
To cover "absolutely all" the bases, in terms of equitable treatment
of both siblings, you stick a rider clause on the in-family sale,
whereby, when the buyer of the other sibling's half subsequently sells
the entire property, *if* that sale is 'without benefit of a real-estate
agent, and related commission expense' that the (present-day) buyer sibling
will remit to the (present-day) seller sibling the dollar value that was
used for the '1/2 the real-estate agent sales commission' in the 'net
proceeds' calculation. IF one wants to get _really_ fancy, you make
the pay-back in 'constant dollars', adjusting for inflation.