If you inherit property with siblings or other family members, there are ways to divide the real estate inheritance without resorting to a lawsuit.
Q: I have an interesting situation. My aunt recently died and left behind an estate which includes a luxury condo in Illinois. My aunt had no family of her own, and left 40 percent of her estate to my mother (her sister), and 20 percent each to me and my two siblings. We have divided and distributed all the assets except for the property.
Here is the issue: My mother and my brother both want to keep the condo for a couple of reasons. They both hope the market will bounce back and that waiting would yield a higher sale price. My mother is considering selling her house and moving into my aunt’s old place. They both live in Illinois.
My sister and I both live out of state and while we are both willing to be bought out of our interests in the house, neither one of us is willing to wait out a protracted sale.
What options do my sister and I have, if my mother and brother refuse to accept what my sister and I would consider to be a fair market price for the house, or a fair offer to buy us both out of our interests in the property?
A: If I understand you correctly, you and one sibling want to sell (to a stranger, or your mother, you don’t care) and your mother and brother want to keep the property, with the idea that the market will bounce back and she could live there. Your mom and brother are local and you and your sister live out-of-state.
The answer is simple – sure, you can go ahead and sue your mother and brother to force the sale of the property either to your mother or to some other buyer. But that action will possibly destroy your family. Your mother and brother will take sides against you and your sister and for what? Some amount of cash that you will receive after the litigation is over.
Let’s say we’re talking about a $1 million luxury condominium that is now worth $750,000. To your point, it could take 20 years to recover that lost equity. Your mother and brother should deal with the here and now. Let’s assume that the property is paid off. Your 20 percent share is worth $150,000. If everyone agrees to sell the property and you can get $750,000, you will actually net about $135,000 after expenses including the broker’s commission, transfer taxes, moving expenses, etc.
If you sue your family, you could easily spend thousands of dollars to force them to buy your share. That would take your share of the proceeds from the sale of the property down quite a bit. It may be hardly worth the time and expense to litigate this issue where you might have other options.
Another option might be to work with your mother and brother and see if you and your sister can determine the value of the home now and determine what your share of the home would be if you were to sell the home to a disinterested third-party buyer. Once you have that information and know what you and your sister might be owed in that situation, you can work with your mom and brother and see if they can obtain a mortgage on the home. If they can take out a mortgage, they should have enough money to pay you and your sister off.
The new lender should be willing to work with your mom and brother, particularly if your mom will use this home as her primary residence. If your mom and brother are employed, the loan application process will go smoother than if they are unemployed.
Finally, you can talk to a real estate lender or mortgage broker about your situation to get further information. Your mom and brother would be financing the home at historically low interest rates and it may well be worthwhile for them to pay you off now, especially if they believe the market will go up. They can reap the rewards later on when they sell the home at a higher price.
On a separate note, why do you need the cash? Are you out of a job? Do you have kids about to go to college and this will go a long way toward paying those expenses? Do you want to start a business? Or do you just want to settle the estate and move on?
Perhaps there is another way to look at this situation. If your mother and brother want to keep the property but they don’t want to take out a loan to buy out your shares, then perhaps your mother can sell her property and move into this one. That will supposedly free up the cash from her place. She can start to buy out your interest in the property over a period of time, or she can lend you a sum of money against your share in the property, using the funds available from the sale.
If she realizes money from the sale of her home, she can turn around and give you and your sister some of that money either as a down payment against your share in the property or as a loan, or if she gets enough money from the sale, she could pay all the money off that she might owe both of you. (All of this would have to be documented and recorded to protect everyone.)
You should consult with a real estate attorney who can help mediate the discussion, so it is productive rather than destructive. Again, it’s not worth destroying your family over this apartment. If you don’t know a competent real estate attorney, contact your local Bar Association.
Thanks for your letter.