How to deal with a sale within the family
Two relatives and I inherited a property. The property is owned free-and-clear, all taxes are up to date and no bills are due. Now one of my co-owners wants to buy us out. What’s the best way to have a sale within the family?
When a property is sold, the owner usually seeks the highest available price – but this is not necessarily true within families. For these transactions, price matters, but there also may be sentimental concerns and family dynamics that can impact sale discussions.
The first question is whether the two other owners want to sell.
If the answer is yes, then is there a price that is acceptable to all owners? Will the sale price be based on fair market value or will there be a "kinfolk" price, a discounted deal among relatives? If the property is sold, then what is the tax impact for each owner?
If one or more of the owners does not want to sell, then either ownership will remain as is or there will be a suit for partition. With a suit for partition, the matter will go to a judge who can order a sale. You can bet that such a suit will not be good for family relations.
Sales within families do best when everyone thinks he or she gets a fair deal, so one of the first steps should be to have the property appraised, to have an independent estimate of fair market value.
Once there is a notion of value, then the owners can decide about pricing. Some of the factors to consider include the lack of marketing costs (because a buyer is in hand), the speed of the transaction (ditto) and the potential use of cash from the sale.
After the general outlines of the deal are established and everyone is happy, the transaction should include a written sale agreement and deed prepared and recorded by a local attorney as well as advice from a tax professional.
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