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Thread: Buying out a sibling's share of an inherited family home

  1. #1
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    Default Buying out a sibling's share of an inherited family home

    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?

    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.


  2. #2
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    Default Buying out a sibling's share of an inherited family home

    botony@talk21.com (BoAnthony42) writes:
    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 rlcarr@animato.arlington.ma.us


  3. #3
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    Default Buying out a sibling's share of an inherited family home

    BoAnthony42 wrote:
    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


  4. #4
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    Default Buying out a sibling's share of an inherited family home

    botony@talk21.com (BoAnthony42) wrote in message
    news:<71d9i0dtv9v6rt96c6sa4nem2p8lrgkl99@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? 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).
    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


  5. #5

    Default Buying out a sibling's share of an inherited family home

    "BoAnthony42" <botony@talk21.com> wrote in message
    news:71d9i0dtv9v6rt96c6sa4nem2p8lrgkl99@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? 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.
    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



  6. #6
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    Default Buying out a sibling's share of an inherited family home

    BoAnthony42 wrote:
    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


  7. #7
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    Default Buying out a sibling's share of an inherited family home

    botony@talk21.com (BoAnthony42) wrote in message
    news:<71d9i0dtv9v6rt96c6sa4nem2p8lrgkl99@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? 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.

    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


  8. #8
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    Default Buying out a sibling's share of an inherited family home

    In article <6d8li0h83eh91o5euarohqpn3ojvooh1pn@4ax.com>,
    Michael Jacobs <mjacobslaw@comcast.net> wrote:
    botony@talk21.com (BoAnthony42) wrote in messagenews:<71d9i0dtv9v6rt96c6sa4nem2p8lrgkl99@4a x.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 noagent involved? A 50-50 split means 50-50, not 47-53. The sellingsibling'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 islikely to go to court to force a partition sale in which the sheriffwill auction the property to the highest bidder on the court housesteps. You will both get screwed since you will not get anywhere nearthe actual market price in a judicially forced sale. That factprobably won't make any difference to your sibling, since you'replanning to screw him/her anyway, and he/she figures it's better toget 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.



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