I have two brothers and we inherited our family home about five years ago. We have kept this home as a rental property for the last five years, but now I want out. My brothers have offered to buy me out. The house appraised recently at $2 million, and I have asked my brothers for a one-third split of the appraised value.
My brothers contend that other fees should be deducted from this figure, such as the costs to sell and any other fees associated with a sale. They use the real estate commissions as an example. My stance is that no fees are being charged for this transaction, so I am due the one-third value of the appraisal.
Again, they say if we sell this house today at the full appraised value none of us would walk away with one-third of the appraised value in hand. Who is correct?
Brother Up in Arms in California
Ah, siblings. Some would give you their kidney. Others would take their pound of flesh if you gave them half the chance. That’s the sad, desperate reality of many people who have written into the Moneyologist. They’ve stolen $100,000, bounced checks on their parents, hidden wills, tried to take control of their parents’ estate to fuel an opioid addiction and even taken out $30,000 in loans from their mother and hoped to never pay it back after she died.
Ah, siblings. Some would give you their kidney. Others would take their pound of flesh if you gave them half the chance.
Thankfully, your dilemma is more of the kitchen-sink drama than the Shakespearean kind. If and when they sell the family home, they say they will have to split the fees two ways, instead of three. “That’s not fair!” they say. “You should pay for those fees now if you want to give up your one-third share.”
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But they potentially have much to gain by you selling up now. This home will likely be worth more in years to come. And after all property taxes and fees and taxes are paid, they will also (I presume) make a profit on the rent on the house. If they want you to pay one-third of future sales and legal costs, even though you won’t own the house in 2020 or 2025, or whenever they decide to finally sell, does that mean you also receive one-third of rent and one-third of the increase in value of this property? What generous brothers! That seems like a good deal to me.
On the contrary, you should pay your share of any costs related to you selling your portion of the home to your brothers with the advice of a lawyer, as is usual for your state. And the rest of the rent, increase in property value and — yes — sales cost if/when your brothers decide to sell the house should be paid by them.
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