Dear Real Estate Adviser,
I’ve inherited 50% of a house that’s fully paid off. The unmotivated nephew who owns the other half isn’t cooperating or paying anything for insurance, upkeep or taxes. I’d like to buy him out and keep the house, which a real estate agent “comped” at about $200,000. What would be a fair price to pay him, given all the continuing expenses I’m forking out? How can I do this?
— Rick W.
Dear Rick W.,
First, ask the nephew if he has any long-term plans for the house, but tell him you need a permanent solution because it will be lost if he isn’t willing to help pay upkeep and expenses. Then tell him you want to live there and will buy his half for fair-market value. He’ll probably be quite happy to walk off with $90,000-plus without lifting a finger.
Understand loan options
You have a few financing options. You can apply for an estate (inheritance) loan that would pay off your nephew. Then, once the home is in your name, you could refinance your 50% at a lower cost and free up cash needed for repairs or upgrades. Or you can try to simply refinance your half to buy out the nephew in what’s called a “no-cash-out refinance” and even roll closing costs into that sum. Talk with a few competing lenders to get a clearer picture of your best strategy, which will depend on your credit, date of the inheritance and other factors.
Research rates and find a mortgage today on Bankrate.com.
Get an appraisal
As for the home’s value: While the Realtor’s comp is likely accurate, you will need to get the property appraised. Ideally, the appraisal estimate should loosely jibe with the agent’s comp and the city/county tax assessment. However, know that in very strong markets, such bank appraisals tend to be 2% to 4% higher than actual value.
Make it stand up in court
Get your agreement with the nephew in writing. While it’s an added expense, you should hire a real estate/closing attorney to work out the details, formalize the agreement and get the deed changed into your name.
If the “unmotivated” nephew balks and won’t sell nor contribute his share of the upkeep, you could force a sale by going to court to seek a partition order if you just want to liquidate the place. But such acrimony is a good way to drive a wedge between you and other family members, so avoid this if possible, especially since you want to live there.
A lesson here for everyone is that people writing a will with property involved should be more specific on how they want the home divided to make the process legally binding, including who is responsible for upkeep and what happens in the event there’s a division dispute.
However, I get the feeling your nephew will come around and sell his share. It’s rare that a young, unmotivated person will turn down free money.
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