Splitting an inherited property - fair methods?
- Thread starter OddGuy
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Ian S
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It's unfortunate that the method apparently wasn't spelled out beforehand. When a significant other and I broke up and we had to decide what to do with a jointly purchased home, we had the procedure spelled out in detail. Good thing too, because we both had differing memories of what the procedure was until we dusted off the agreement. I suppose getting some realtor appraisals would work however I might be inclined to have a couple of actual paid appraisals. But I suppose it's whatever the heirs can agree on that counts.
Humbooster
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Unfortunately I am living this one right now, I agree with pacergal, get an estimate or two, it may cost a bit but at least you will get to a fair number.
Depending on where in the world the property is located, be prepared for a shock with inheritance tax or Capital acquisition tax.
Depending on where in the world the property is located, be prepared for a shock with inheritance tax or Capital acquisition tax.
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Do these siblings all get along and have no grudges/complaints with one another, no Dad-Liked-Me-More stuff?
Will the non-willed sibs be happy to get bought out and get some $$ with the other one keeping the property?
Can the sibs each do a little research, and come together over coffee to discuss?
If yes to all that, great, you do that, then you all pick out a realtor or 2 after doing google/zillow research, and agree to go with consensus.
If not, sell the place and split the proceeds, everyone walks away.
Ian S
Thinks s/he gets paid by the post
+1! Great advice.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
When I helped my mom with her will, the plan was that my brother and sister would get her share of the family cabin and I would get cashed out because DW and I had our own cabin across the lake. To avoid any family tension, I (i.e., she) specified that the county assessor's estimated market value would be used for the calculation. These tend to be a bit low, but if so I was the wounded heir and I did not care. Brother and sister were very happy with the process.
Regardless of what you use, I strongly suggest that the appraisal method be agreed upon before any appraisals are actually made. I would use professional appraisers, not some random realtors, possibly each sibling would arrange and pay for his/her own appraisal then maybe calculate an average. If I were doing it I would also have a legal agreement drawn up and signed to document the agreement and to forestall any future changes of heart.
This. Most important.
Inherited Property
We used values from on-line zillo, redfin ect. There's usually a range. We valued it at the low end of the range then subtracted out fees that would be required for selling. We used 10% and valued it at that.
We used values from on-line zillo, redfin ect. There's usually a range. We valued it at the low end of the range then subtracted out fees that would be required for selling. We used 10% and valued it at that.
W2R
Moderator Emeritus
When my mother died, she left her jewelry to the three of us kids with my brother George as executor of her estate. The jewelry was very elaborate and expensive looking. George did considerable research to find competent, well regarded appraisers and had three appraisals done. The values obtained from all three appraisals were nearly identical.
One of us three kids had always wanted to buy out the others and take the jewelry (for sentimental reasons), and we all agreed on that. So, based on those appraisals each of the others was sent some money representing our share. That seemed extremely fair to me. This despite the fact that the jewelry really wasn't as valuable as any of us had thought.
Landolink
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We live in IL and Mom owns a cabin in Michigan. Any idea what inheritance tax or capital acquisition tax would be. Cabin worth around $500k. 8 kids. Not sure if anyone wants to purchase it after Mom passes.
troutnut1
Recycles dryer sheets
Realtors are licensed and trained to market and sell real estate. They are NOT trained for, licensed for, or qualified to do real estate appraisals. Although some have a good idea as to market value, and all can provide “comps” and competing properties to help us get an idea(free market analysis), when the valuation is important you’ll want to consider a real appraisal, from a real appraiser. This will cost money. Probably $500 each.
I’ve had long careers as both a Realtor and as an appraiser. Real appraisers are called to a much higher standard and voluminous federal regulations and oversight. They don’t have undisclosed conflicts of interest. And their reports will likely stand up to scrutiny by the IRS if the valuation is later an issue such as when the property is resold.
Be aware, that even with paid professional appraisers, there can be pretty significant differences in the valuations derived. It wouldn’t hurt to have two and consider both in coming to an agreement about value. Also realize that real appraisers use actual sold and closed transactions to document value. In very hot markets actual value may be somewhat higher as new records are set.
I’ve had long careers as both a Realtor and as an appraiser. Real appraisers are called to a much higher standard and voluminous federal regulations and oversight. They don’t have undisclosed conflicts of interest. And their reports will likely stand up to scrutiny by the IRS if the valuation is later an issue such as when the property is resold.
Be aware, that even with paid professional appraisers, there can be pretty significant differences in the valuations derived. It wouldn’t hurt to have two and consider both in coming to an agreement about value. Also realize that real appraisers use actual sold and closed transactions to document value. In very hot markets actual value may be somewhat higher as new records are set.
Not sure but check your state for inheradance taxes. But the property should get a step up value, so after death get an apprasial and that is the new number for capitol gains. If the cabin was bought at 50k and is worth 100k now, you dont pay capitol gains on it. If it sells 9 months later for 110k, you pay capitol gains on the 10k. Best to sell as close to the date when your family member passes.
jollystomper
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It might be tricky to rely just on a realtor to give the value of the house. In our case, for our parent house, the realtor's appraisal (and offer) was much lower than what it actually sold for. There are 7 siblings. Sister B was left the house (she lived in it with Mom), and we each had a designated percent of the house. We all got along, and Sister B continued to live and maintain it for several years after Mom passed, until she married and moved out.
At that point we discussed buyouts, but none of us were keen on the idea We chose to bring it a realtor, to put in on the market; based on the offers, we agreed any one of us could choose to match the best offer and buy out the others. But before the realtor put the house on the market, she came forward with a buyer who had an offer. We chose to turn it down. We felt, after more research, was that the buyer likely was looking to flip it quickly, and that we could get a better price, particularly as it was a sellers market at the time. The realtor put it on the market, and the best offer came in six figures more than the first offer through the realtor. We chose to accept that offer instead of any of us buying out the others, and were happy with the result.
At that point we discussed buyouts, but none of us were keen on the idea We chose to bring it a realtor, to put in on the market; based on the offers, we agreed any one of us could choose to match the best offer and buy out the others. But before the realtor put the house on the market, she came forward with a buyer who had an offer. We chose to turn it down. We felt, after more research, was that the buyer likely was looking to flip it quickly, and that we could get a better price, particularly as it was a sellers market at the time. The realtor put it on the market, and the best offer came in six figures more than the first offer through the realtor. We chose to accept that offer instead of any of us buying out the others, and were happy with the result.
LateToFIRE
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The short answer is that the executor decides. If its a fairly standard type of property (ex. condo in a large development with many identical comps) then getting a couple of opinions from local realtors should suffice. If you're talking something custom built on a unique property in an area where comparable sales are rare, you may need to engage an appraiser.
OldShooter
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If he doesn't care about risking an irretrievable destruction of family relationships. Much better to establish a consensus on the method for determining value, then proceed with getting some actual numbers.
and, BTW, the cost of professional appraisals, even if each sibling gets and pays for his own, is going to be a trivial fraction of the market value of most homes and will have immeasurable value in minimizing future family disputes.
MC Rider
Thinks s/he gets paid by the post
Forget Zillow and Realtor.com for this purpose.
Not a Realtor or RE agent either.
You want an appraiser that is familiar with your area and property type.
If it is in town and there are good comps, it should not be more than a few hundred dollars I'll guess. If it does not have good comps for whatever reason, it will cost more. Also this a major source of where the differences of opinion as to market value come in. If you have a tract house and recent same model sales, it should be inexpensive. Signed, Residential Appraiser retired after 30 years.
Not a Realtor or RE agent either.
You want an appraiser that is familiar with your area and property type.
If it is in town and there are good comps, it should not be more than a few hundred dollars I'll guess. If it does not have good comps for whatever reason, it will cost more. Also this a major source of where the differences of opinion as to market value come in. If you have a tract house and recent same model sales, it should be inexpensive. Signed, Residential Appraiser retired after 30 years.
Sunset
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IF your Mom dies and lives in IL and is the only owner, then the cabin will pass tax free to the heirs, assuming your Mom has less than ~4 Million dollars to pass on.
IL has a 4 million dollar estate tax, now since the property is in another State, and MI has no estate tax, there could be an opportunity to wiggle out of some IL state tax if needed.
Note: IF your Mom lives in MI, then zero estate taxes.
The Fed limit is 12 Million.
https://smartasset.com/estate-planning/illinois-estate-tax
https://smartasset.com/estate-planning/michigan-estate-tax
EastWest Gal
Thinks s/he gets paid by the post
Part of my inheritance in 2009 included a portion of farm property. I hired an appraisal company which appraised the property. Using assessments in California is useless due to Prop 13 (1978). My sister and I decided that in order to divide the estate equitably and not to dilute the farm asset further that one of us who take the property and the other would get the equivalent in cash or other investments.
I hired an appraising company to do the valuation. It cost a bit but was worthwhile. Better than guessing and you have a paper trail.
I hired an appraising company to do the valuation. It cost a bit but was worthwhile. Better than guessing and you have a paper trail.
MC Rider
Thinks s/he gets paid by the post
You might need that paper trail for IRS.
So, get someone with the proper credentials.
So, get someone with the proper credentials.
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A professional appraisal.
I went through this in a divorce, which is similar except there were only two of us. Fortunately, we both came up with a number that was reasonable to both of us and we went with it. We looked at Zillow, tax assessed values, etc. In the end, as long as all parties agree to the value, then it’s all good. Saved us money in not having to get an appraisal, which others have noted, can also vary by quite a bit.
If I was OP, I would see what all the siblings think is a fair market value. If there are differences, see if it’s close and if they can come to an agreement. If so, problem solved. If not, then you can throw money at the problem and get a professional valuation.
If I was OP, I would see what all the siblings think is a fair market value. If there are differences, see if it’s close and if they can come to an agreement. If so, problem solved. If not, then you can throw money at the problem and get a professional valuation.
Koolau
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Yeah, see the movie DESCENDANTS. Always some unhappy campers around inheritances - especially if significant money is involved. When one person makes the decisions, it's likely everyone will be unhappy!
nhcycling
Recycles dryer sheets
When selling inherited properties to siblings, we got 3-4 realtors estimates and then agreed on a sale price.
LateToFIRE
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Of course! Just from personal experience, especially when the $$$ in question are non-trivial, it can be difficult to gain that consensus. In the event can't get agreement, another potential option is to bring in a professional mediator (someone who is more shrink than lawyer if its family dynamics getting in the way).
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Thanks for the confirmation. An important part of my point, though is to agree on a method before anyone has any numbers. If the method has been agreed-upon it is harder for anyone to object if they don't like how the numbers turn out.
For me, having each heir hire their own certified appraiser seems like the best approach. Then each can try to cherry-pick and jawbone their appraiser,. so it all comes out even in the end. If only one heir hires an appraiser then others can claim that the appraisal favored the heir who hired the appraiser.
For me, having each heir hire their own certified appraiser seems like the best approach. Then each can try to cherry-pick and jawbone their appraiser,. so it all comes out even in the end. If only one heir hires an appraiser then others can claim that the appraisal favored the heir who hired the appraiser.
