If you inherit property with siblings or other family members, there are ways to divide the real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. 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 priceThe Market Price of a bondA Bond is a government's (federal or municipal) or a corporation's obligation to repay you your principalPrincipal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of ,000. If you buy a ,000 bond, your principal is ,000. plus a certain amount of interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. over a fixed period of time. is determined by traders who buy and sell bonds. On any given day, your bond will be worth more or less than the face value. That's because the bond market is continually active, with traders bidding up and down the value of bonds based on the current interest rate of the day. When interest rates rise, bonds are worth less (because it takes a smaller amount of capital to earn the same amount of interest). When interest rates fall, bonds are worth more (because it takes a greater amount of money to earn the same amount of interest.) 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 pointA Point is one percent of a loan amount., it could take 20 years to recover that lost equityYour share of ownership in a company. Stockholders are often referred to as equity investors, because they invest in the equity of a company. . 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 mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. on the home. If they can take out a mortgage, they should have enough money to pay you and your sister off.
The new lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. 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 loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest. applicationYour Application is a series of documents you must fill out when you apply for a home loan, or insurance policies. process will go smoother than if they are unemployed.
Finally, you can talk to a real estate lender or mortgage brokerA Mortgage Broker is a company or individual that brings together lenders and borrowers and processes mortgage applications. 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 attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate. 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.