How to value a property

[ivinsfan]

So right off the bat you are too emotional here. Your "breach of trust" comment for example. So there's some emotion going on. Per your adult children life is hard and Sh#$ happens.



To be fair there is no problem with grown adults being interested in the money. That doesn't mean they don't care about past times and such but their position is just a valid as your DD. Saying Dad wanted it to stay in family is just his opinion and other people are entitled to have other opinions about land they actually own.



Don't let this cause friction in your family...

 

[Jerry1]

Why couldn't her sisters pass it to their stepchildren in their will? If the reason for selling it is that they don't think that their stepchildren will benefit from the land then it doesn't have to be that way.

Simple answer is that dad wanted it to stay in the bloodline. That's how the irrevocable trust was set up. Now that both parents are passed, a new agreement needs to be set up for the trust. We replicated the original trust and that's when this all came to a head.

 

[ivinsfan]

OK, I see you mentioned your daughters while I was typing my previous reply. What about involving them in the ownership? Are they in a position to absorb part of the cost? If not, are they old enough to see this from their aunts' point of view and understand that owning a third of a piece of property that they can't pass on in their own families is also difficult for them?

I don't understand the comment about stepchildren...did it mean the stepchildren have no interest or history with the property or something else?

 

[ivinsfan]

Simple answer is that dad wanted it to stay in the bloodline. That's how the irrevocable trust was set up. Now that both parents are passed, a new agreement needs to be set up for the trust. We replicated the original trust and that's when this all came to a head.

OK well now you included that detail this is on your Dad. And FYI if I was a sister I'd want it sold too. This is a nightmare waiting to happen.

 

[pacergal]

Your wife wants to keep the property, has she tried negotiating with her two sisters on price?
Perhaps, as stated in an earlier post, all three of the sisters get independent appraisals and come together to decide on a fair price. This is between them.

I only speak from experience. When my last parent died, and it came to selling their home, when the in laws joined the conversation, all of a sudden, we had 8 opinions instead of 4. It was tougher to come to a consensus.

 

[pb4uski]

Simple answer is that dad wanted it to stay in the bloodline. That's how the irrevocable trust was set up. Now that both parents are passed, a new agreement needs to be set up for the trust. We replicated the original trust and that's when this all came to a head.

Unless Dad said keeping it is the bloodline was a provision of the trust then it doesn't matter. Besides, you concede that if it was too much for you that all of you would sell and then it definitely would not be in the bloodline. And one could argue that the stepchildren are part of the bloodline.

I'm guessing that Dad would prefer his 3 children sharing the land with their children and stepchildren as a good result vs the land being owned by an outside party.

Why wouldn't the trust just continue now that both parents are passed? Is that built into the trust?

You said that there are 3 co-trustees. Do any decisions require unamious consent or just majority consent?

 

[CRLLS]

We did a private sale on DMILs home a couple of years ago. The estate paid for the appraisal to ensure that the offer was reasonable. There were other comps of sold properties so getting close to the theoretical real market price was relatively easy. Both the appraiser and I were in agreement within a grand or two.

Having an independent appraiser determine the value if sold, sounds reasonable. Being paid by the trust instead of one of you, would be an arms-length appraisal and may keep everyone from future bad feelings. I feel a realtor's market analysis could easily be swayed one way or another, depending on their experience and their office's business model.

 

[Sunset]

Simple answer is that dad wanted it to stay in the bloodline. That's how the irrevocable trust was set up. ....

That is a limiting condition.
If a person actually believes in that concept (like the Royal Family might) then it means certain actions are needed, as without those actions, it's just wishful thinking:

It means nobody can adopt a child and expect the child to inherit the property.

It also means, Any male has to have his children checked by DNA testing as only a female (mother) knows for absolute sureness the child is hers at the time of birth.

And really since I personally know of a case of baby switching, and have read of other cases where a baby is switched by accident/etc at the hospital, DNA testing of all offspring is really required.

 

[Aerides]

2 of the 3 siblings want out. How best to go about valuing the land? I know I could, and will, get a market analysis and/or and appraisal, but then what?

Having read all the details and later posts, my question would be have you asked them, point blank, "Ok, what is a fair price? What would you have us do to determine that price?" - then (lawyer helping) proceed with what they agree to.

Now, it's entirely possible and fair that the answer is the price is the market - and the only way to know is to list it and wait for bids. If I were on the side of "sell it for the most money" I'd probably want to do that.
But not selling it and just having you pay the 2/3 of an agreed value avoids a lot of hassles and costs of selling. So perhaps they can see reason if instead you go 2-3 appraisals and split the difference?

But it doesn't really matter what we say is the best way to determine the value - the answer is it's the way the two other siblings want....which is probably not the same either.

 

[OldShooter]

There is another aspect here: On the open market, selling an undivided 1/3 interest in a property is difficult and may lead to complications for an arms-length buyer. As a result, the undivided interest is not worth even close to 1/3 of the overall intact property value. Selling an undivided 2/3 interest is a different matter as that puts the buyer in charge and able to force the 1/3 owner out.

IANAL. In the interest of family relations, you may not want to play this card but I suggest that you talk to a very experienced real estate attorney to determine your options.

 

[Jerry1]

Does this land produce any income? How big of a piece is it? Why does your spouse want to retain it? These answers will all have a factor in the price.


As far as your comment about the realtor you'll have to pay the commission, how is that not fair. The 3 sibs will have to pay part of the commission anyway.


How long ago did the parent die, some emotions might be coming into play here as well. Some of the suggestions here are fine but let's not forgot the other 2 sibs have an input here are that interested in Jerry getting the best price, they want the highest price.

The land does not produce income. It's about 2 acres. It's more than that, but it's on Douglas lake and they can bring the water level up to where it's 2 acres. Actual ownership is 8 acres.

A agree, that payment to the realtor for obtaining a good offer is fair (absolutely). Who it's not fair to is the person we use to get an offer, just to have it used for our purposes.

 

[Winemaker]

When purchasing a rental property, one can only depreciate the cost of the building and improvements, not the cost of the land. I have always asked a realtor or two, for the worth of vacant land nearby using comparables, and got it in writing for future use.

 

[ivinsfan]

Well Jerry depending on the actual price someone offers, can you be certain it won't be sold ? That's the question I guess.

 

[Jerry1]

Why wouldn't the trust just continue now that both parents are passed? Is that built into the trust?

You said that there are 3 co-trustees. Do any decisions require unamious consent or just majority consent?

I'm not clear on why a new trust agreement was necessary. We have a call with that lawyer tomorrow. DW doesn't ask the same questions I would have so we need to back up a bit now and get this straight.

Three trustees and unfortunately, they gave each trustee the right to act independently. This was done so that things like banking could be handled by one person and not have all three just to pay bills. Realize that this was done because if mom had lived much longer, the sisters would have had to start paying her bills out of the trust. And yes, if it were ultimately needed for mom's care, we would have had to sell (or buy) the land.

 

[Jerry1]

Well Jerry depending on the actual price someone offers, can you be certain it won't be sold ? That's the question I guess.

Agree. That's why I don't really want it to go on the market if I can afford it.

 

[Jerry1]

Thank you all for your input. You've given me some things to consider but mostly, it sounds like the appraisal route is about the best I can get without actually putting the land on the market. I'll work on getting the appraisal.

 

[W2R]

I got an appraisal when I bought out my sister. Went fairly smooth.

+1

Thank you all for your input. You've given me some things to consider but mostly, it sounds like the appraisal route is about the best I can get without actually putting the land on the market. I'll work on getting the appraisal.

+1

I'd get an appraisal.

When my mother died, she left a substantial amount of insanely expensive jewelry for us to deal with. (I know, who actually wears that kind of high end jewelry? Well, she did, sometimes. She had paste replicas for everyday use. LOL)

My brother took it to what he felt was the best and most well known jewelry appraiser in the country, in NYC. Then after checking the appraisal with a couple of other appraisers to make sure it was reasonable, he submitted the appraisals to the rest of us siblings, got our agreement, and then bought it from the estate for that price (for his wife) and we all felt like it was quite fair.

To me, the biggest value in getting an appraisal is in forestalling any possible family conflict over it.

 

[pb4uski]

I'm wondering if you might just ask them... how much do you want for your 1/3 interest in the land?... and see what they say.

For all you know, they may underestimate it and you can get a deal or their expectations may be so outrageous that it isn't worth pursuing unless or until they get more realistic, but you won't know if you dont ask.

I would soft peddle it ... you guys want out and we might be interested in owning and using the land as dad envisioned... how much do you want?

 

[ivinsfan]

Agree. That's why I don't really want it to go on the market if I can afford it.

Well I was actually pointing out this gives you and the sisters all options...it's also pretty hands off. But market value is market value..

 

[calmloki]

Lots of in-laws..

a decade or so ago my gal's last parent died. She had been flying back and forth for alternating 2 week periods caring for her for several years. Not easy on our relationship, but her mother was a sweetie. Afterwards she was executor of the trust and the house and property went to her sister for an absurd value. The sister is .. special. I was not pleased with the unfairness to my gal and the way she seemed to be rolling over to accommodate absurd requests from same. I was vocal. Bad idea. Better to accept that siblings have their own relationships and that having a hubby making noise and (in my mind) sticking up for his honey just whipsawed the girl as she tried to do the right thing. Her emotional outweighed the financial.

How old are your heartbroken daughters? Maybe I'm a callous bastid, but heartbroken sounds like a twelve-year old's response to a land sale. Are you the one having an strong emotional response to something your daughters would be sad about, but accept and move on from?

 

[MC Rider]

Appraising vacant land can be difficult and tricky. It's easier if there is no doubt as to the "Highest and Best Use" of the land. If it is zoned SFR and the area is all SFR, you probably have no doubt that H&B use is SFR. There also need to be sold vacant land comps, and hopefully they do not need to go miles and miles to find them.


Anyway, find an appraiser that is familiar with that area and experienced there. You might try looking at the Appraisal Institute page, or your state appraisal board page. Good luck.

 

[SecondAttempt]

I don't want to sell it. I need to buy out DW's two sisters.

Have you thought of asking them what they think the market price would be? If it is close to your idea of the value you could agree to it. It it is too high you could list it for sale at their price but decline to sell at less.

 

[rk911]

We have a family trust that holds a piece of land. 2 of the 3 siblings want out. How best to go about valuing the land? I know I could, and will, get a market analysis and/or and appraisal, but then what? My experience would suggest that those are just starting points and one never knows what something is worth until an independent party makes an offer that the seller would be willing to take.

I thought about trying for something like putting it on the market and then when an offer that the 2 would accept comes through, match that offer. Unfortunately, I can't imagine any realtor would take a listing with that type of contingency and plus, it doesn't seem fair to the person making the offer.

Is there any good way to nail down a number? It's no exaggeration that the outcome of this could impact the family dynamic very negatively going forward. I'm trying for a win win, but all I'm seeing is a losing situation.

I assume this property is not developed. What value does the tax assessor place on the land? That's your starting point. Get an appraisal for the value if you were to sell to a developer. That's your end point. It may cost your siblings a few hundred bucks for the appraisal but they're pushing this. You could always split the cost 3-ways to keep the peace. You can only deal with values at this moment in time. Assuming land values will increase is a roll of the dice.

 

[Sunset]

I can understand why 2 siblings want to sell.
Their children are not in the bloodline, so either it's sold now or they simply will lose out on any value to their family.

Getting real appraisals is the only real way to have a good estimate of the value.

 

[HarveyS]

It sounds to me like the OP is trying to get information ahead of and without the other two sisters knowledge. If so, this is where trouble will come from.

Be open and transparent. As others have mentioned, I'd back away and let DW handle it. First, have the three agree on a process. I don't like asking them what they think their share is worth. It has the opportunity to set the bar too high. And, if they come in low, it sets the stage for a disappointment later.

Together, the three can agree to get a number of appraisals and split the cost for this. Agree ahead of time what to do with the appraisals as was pointed out earlier. (if close, split the difference, or if needed get a third, etc.). Back up plan could be to put it on the market for x days with right of first refusal (again, as mentioned). All fees split three ways.

I'd stop working solo ASAP. The others will eventually find out and be (IMO) rightfully pissed off.

This is family, not some third party. It is not a simple business transaction.