Looking for people in the know (real estate, real estate law, appraisers, inspectors, etc) to answer this question. My Father passed away in October of 2012.. My 5 siblings want to buy me out on his house (which is paid off.) They all live back home in CA, and they said they want to keep it and rent it out. I live 10 hours away and have no interest in the house. I am all for them buying me out. Here's the question:
They said the next step is an appraisal. My exucutor/sister eluded to the fact that the house needed alot of work and that it needs to be inspected at the appraisal so the work can get done .( she said termites, roof, interior and exterior paint, (and probably more). I have a feeling they are going to try to do this work on contingency to them buying me out. Can they do that? Two sisters have aleady dropped that in my ear, that is why I think they are going to try to make it "part' of the transfer process before it can be 'sold' to them. I don't think that is fair, since I will not have any ownership in the home, why should I have to pay to help fix it up out of my part of the estate so that they can make money on it and rent it out or perhaps let my brother continue to live in it? Fixing it up like that will not raise the appraisal price.... When I was in CA, I sold a very nice home in that area.We put 100K into it over the previous years, for nothing. It actually sold for 10K less than a similar house around the corner which did not have ANY upgrades. In CA, when appraisals occur, really, the weight of the value rests mostly on square footage, number of bedrooms, pools, and local comps. Facial upgrades really don't factor in hardly at all. So the local comps that were outdated forclosures, pulled my home value down. That particular area of CA is still in bad shape, rated # 5 in the country for foreslcosures. Which means every seller looses value right off the top.
My dad's house is in livable condition, just outdated. The roof doesn't leak, but they claim it is in need of replacing. There are no holes in walls, no pipe leaks, all the appliances work, the carpet is old jewel green, but still in great condition. Just outdated... and certainly in need of cleaning. Countertops and floors and sinks, etc are older and perhaps faded, but in good working condition. The lawn has some weeds in it, but nothing that couldnt be brought back with simple care. At one time several months ago they were talking about tearing it out and expanding the driveway cement to a 4 car parking area, and back filling the rest with gravel so it would be easier for my brother to take care of after he moved in (dad was in nursing home).
Yes, they will have to upgrade it if they want to make a business venture/rental out of it. So how do you see this all playing out if it were to be done fairly?
Have them buy you out for what the house would sell for right now. They can invest in fixing it up, using their own money.
It doesn't matter what a realtor says the property is worth with their market analysis. If a person put their home up for sale for $100,000 & someone agrees to pay $100,000, they cannot sell the home until a full appraisal has been done. The only way an appraisal doesn't have to be done is if the buyer is paying cash.
Not in the business, just my opinion.
If you were selling the home to a random stranger, they would request an appraisal. Both sides should have a professional value placed on the home.
Who cares if they are going to rent it or live in it. Once you sell it, they are free to do as they wish.
The comps go up and down depending on what has sold in the area. Perhaps someone recently made a lot of money on their home and your value goes up.
Treat this sale as a business matter, just as they are. If the deal stinks, walk away.
I would NOT take your siblings word for it. I would also tell them that you will NOT let them buy you out if you have to pay to fix up the house. They will get years of benefit of renting out the house. It's not fair for you to pony up for THEM to get the benefit.
They are using your disinterest and distance against you here. I wouldn't let them do that, and I wouldn't let them off the hook.
Insist on an inspection by both a house inspector and an insect inspector. If there are termites, this is really serious and you need proof from a reputable company (not your brother's friend's friend who is cheap and will write a "note".)
An accountant will need to do the work for all of you, including the taxes. If I were you, I'd invest in a meeting with an accountant who does taxes for estates as well as real estate. Find out what the in's and out's are. Don't believe what your siblings say. They will look stuff up on the internet, listen to friends' advice, anything to not have to spend a buck. You need to know the pros and cons of selling and owning. Both from a financial aspect and from a taxable aspect.
You may see me as not trusting your siblings. I love mine, but I would not just trust them to handle this. And I certainly wouldn't hand out ANY money without having done everything I'm talking about.
Dawn
I am in this very situation right now! If I could afford it, I would buy one of my sisters out just to make her go away!!
If I were you, I would let them buy you out at the value it is right now - then you won't profit/lose when they fix it up and either sell it or make money on renting it. That would be the fair thing to do right now! Why should you profit AFTER they do all the repairs if you really don't want to participate? OR, you could just stay in it and be a silent partner!
Are you sure of the wording that says you all own the house? You might want to get a lawyer involved so everything is all legal and fair!!
Good luck!!
YOU get a free appraisal from a realtor--or two or three.
No way can they bicker about the lowest if three selling prices. Divide THAT by six and THAT is what they owe you.
Don't get a bank appraisal. Get a market analysis done by a realtor.
1/6 fair market value TODAY is what the need to pay you.
Not 1/6 of what it will be/can be/might be.
Personally, I've been there & got that T-shirt and I think you're SMART for taking your money now!
I would suggest that you have a home inspection done before an appraisal. Provide the inspection report to the appraiser, so that any major deficiencies are taken into account when the appraised value is determined.
That should make all of you guys happy. You will know what is actually needed to be fixed, and the appraised value will be lower based on repairs needed, so your siblings will have to pay you a lower amount.
I will say that some of what they are saying may be needed. Just because a roof doesn't leak doesn't mean that it doesn't need to be replaced. Likewise, appliances may be working, but that doesn't mean they are working safely. Houses owned for a long time may have maintenance issues that have been pushed to the back burner waiting for something to break, instead of repairing things as needed before it breaks.
The reason housed that are upgraded don't sell as well as houses that aren't are often because the decorating person picks colors that appeal to them or what they think buyers might want. Or the value of upgrades and stuff makes the price a lot higher on that house and the other houses in that area just don't sell for that amount.
One of my friends worked his way through college at BYU doing construction work. He built many homes and businesses during those few years. He moved to Oklahoma for a job then didn't get all the benefits he had been told he could have. The house they ended up buying was rather small but in a nice family style neighborhood.
They decided to add on a den to the back of the house, increasing the sq footage and making the house have something the other houses didn't have.
When they decided to move back home a couple of years later they actually found the home value went down because of the addition. I don't know all the ins and outs but the price per foot was less because the house could only sell for a certain amount no matter how big it was because the houses around it would never sell for the same amount.
So if all the neighborhood homes sold for $50K and had 1000 sq feet and this home had 1500 sq feet they could ask whatever they felt was fair but it would still only sell for about $50K because that's what the homes around it were selling for. So the addition was for their own use and didn't increase the value of their home in any way. It was just a cost they spent and didn't get back when the house sold.
I think that right now the housing market is horrible and as long as people are losing their jobs and losing their homes and belongings the housing market will only continue to stay low and fluctuate down there.
I would have an independent Realtor do an evaluation for you with all the stuff along with that, inspections, evaluate the market for the house as it stands and with upgrades, then present that with your offer for them to buy you out. Tell them that if the house sold today, in it's present condition, it would be worth $xxxxxxxx and you are offering for them to buy you out for 1/6 of that value.
I do think that you should all work together to get that amount to an agreeable amount. This is family after all and you should be getting along.
Have you talked to an accountant? And do you really want your siblings to buy you out? Because if that area of CA is in bad shape, the value of the house will be low and you won't get alot of money right now. Personally, I'd take long term rental income over a 1/6 share of a home in a bad market.
do you need the money? what is your relationship with your sibs like?
If you want to get your due, you need to find 3 or more real estate agents & maybe appraisers (remember appraiser are often after a min value for a person to get refinancing and may not know how in reality the sales work like a RE would) & get their fair market value without your sibs involvement - then decide what's fair.
However, keep in mind that if you sibs RE/appraisers give very different comps you are going to have a battle on your hands and it could destroy your relationship with them.
Check the will. What does it truly say? Normally the best thing is to sell it and divide the proceeds (and So Cal market is hot right now I hear). Think about couples in divorce & how most of the time house is sold or lived in provisionally X years while kids growing or one buys out the other based on 3 REs FMV.
Think carefully about your relationships, your finances & what you want/need - proceed with caution.
