Author Topic: Need Some Outside Advice - Family, Property, and Sentimental Attachment  (Read 4298 times)

chemistk

  • Bristles
  • ***
  • Posts: 360
Before I begin, the circumstances surrounding this situation have not fully fleshed themselves out yet, but the ball certainly is in motion. I've been a spectator thus far but I fear I eventually may be pulled into this and will need to have an opinion.

Backstory: My wife's side of the family owns a lakefront property and has owned it since before the area was even a lake. It's the oldest and most prime piece of property on the entire lake and the whole area is on the rise. The number of properties on the lake has more than doubled in the past 5 years. The lake house is large and well-maintained (has enough space to comfortably sleep 20+ people for an entire summer) and is co-owned by my wife's mom, her siblings, and their dad. The property is appraised at $500k, but market value is almost triple that. Generations of family have grown up spending months on the lake and at times, members of the family (including my mother in law for the 3 years after my wife was born) have made it their permanent residence.

Issue: Nobody, save for my In-Laws (including my wife, myself, and our son) uses the lake house anymore. Extensive renovations were done a few years back and the cost was split evenly, but most of the family has been to the property once or twice since then to see it. Most of the family lives 12+ hours away and their lives take them to more affluent areas to vacation. There has been talk for a while of selling the house and splitting the profits equally (even though the family hardly uses it, insurance and utilities are split evenly among the family). Lately, these conversations have been happening more frequently and it looks like this may be an eventuality.

My in-laws spend probably about a month's worth of time there (it's 4 hours away, so long weekends are spent in the summer). My wife and her mom get very, very, very emotional at the thought of seeing the house go. My in-laws are looking at buying out the rest of the family and owning the house outright. I could go into greater detail, but the bottom line is that you could fill a book with their justifications for keeping the house.

Where I need advice: My in laws would essentially have to re-mortgage their house to buy out the family. They have asked to do so at the appraised value, not the market value. They could not afford the market value. There is little I could do or would do to dissuade them from doing this. HOWEVER - it was recently implied that down the road for my wife and her siblings (for us, this would start immediately), the upkeep of the house would be a shared responsibility. This would derail my plans for FIRE for a few years but my wife seems adamant that the house stays in the family. She wants to see our son grow up there. For a myriad of reasons, renting is an unlikely proposition, nor is listing it on VRBO or AirBnB. I can elaborate if necessary.

How would you broach this subject? How do I say that I don't want to incur the responsibility of upkeep without sounding ungrateful?

Cassie

  • Walrus Stache
  • *******
  • Posts: 5527
I don't envy your situation at all. I would not want to be saddled with upkeep, etc for a vacation home. If it was sold for market value could the inlaws buy a small cabin on the lake that they could afford by themselves?

chemistk

  • Bristles
  • ***
  • Posts: 360
I don't envy your situation at all. I would not want to be saddled with upkeep, etc for a vacation home. If it was sold for market value could the inlaws buy a small cabin on the lake that they could afford by themselves?

Unfortunately, I don't think that would cut it. There are far too many memories that have happened there. The house is almost like a security blanket to my wife and her mom.

bobechs

  • Handlebar Stache
  • *****
  • Posts: 1068
As tenants in common (I suppose) the family member owners have the right, enforced by a lawsuit if necessary, to "partition" the property at any time.  While that sounds Solomonically drastic, what it practically means is a forced sale, either to a stranger or a buyout by other family members.

In terms of family relations it is the equivalent of nuclear war on M.A.D. scale.  But it is the deep backdrop of any less ugly entente to be achieved.

To cut to the chase, knowing that the extreme above and the status quo ad infinitum are both not-so-good for you, how about a negotiated settlement to allow the members who want to buy to buy out the others with owner financing?   There are any number of ways to structure a transaction like that and I would not recommend you roll your own relying on online advice from a lot of software engineers who hate their jobs and want to retire early.

The house itself would be the security for the transaction, so no mortgaging of other houses might be required and I think receiving the money over a term of years could be advantageous from a tax perspective.

As a fillip, it might be possible to keep some connection to the family place with a clause that allows paying an agreed rent (which would amount to an offset to the purchase price) to use part of the place as a vacation home, periodically.  It would only be fair to require that, and I'd suggest it be set up like a time-share, certain weeks with payment whether or not the time block is actually used be designated as vacation time. (And no resale of the 'time-share' to strangers.)

If the family can agree to this amicably it would mean no bank needs to receive interest, if the finances fail the house remains in the family, a stranger doesn't get the old place and the only thing that will really change is the money relationships.

Catbert

  • Handlebar Stache
  • *****
  • Posts: 1686
  • Location: Southern California
When you say "appraised value" do you mean for property tax purposes?  Property tax valuation often has little relationship to the actual value of property.  You may get lucky because the other owners would be foolish to sell for 1/3 of what its actually worth.  Keep you fingers crossed.


humbleMouse

  • Bristles
  • ***
  • Posts: 297
  • Location: Minneapolis
By letting them get the lake house @500k instead of 1.5M like you said the market value is, you are essentially making your inlaws 1 million dollars richer.  There's no way in hell I would personally be ok with this. 

MayDay

  • Magnum Stache
  • ******
  • Posts: 3946
I would absolutely put my foot down about owning it and/or paying maintenance.

But my H has known I've been adamant for years. It would have been discussed and negotiated long before now.

A house that big must cost a fortune to keep up. Just no.

I agree that the best scenario is the other relatives want their fair share, aka split the 1.5 million. I'd suggest involving a realtor the next time it comes up.

JustGettingStarted1980

  • Bristles
  • ***
  • Posts: 377
+ 1 with Bobech's input. This seems very beneficial to all parties. Also, I hate giving interest to the banks if at all possible.

chemistk

  • Bristles
  • ***
  • Posts: 360
Thanks for the opinions so far!

Just to be clear, this is my wife's parents' family's house, so I'm otherwise powerless and my opinion is moot unless her parents decide to buy out the others - that's when things get interesting. The family is acutely aware of the property, its value, and everything that goes into owning and maintaining it.

There are two sides to the coin - one is that the family is ridiculous not to want to spend time there; the other is that my in-laws are crazy not to want to sell!

AlwaysLearningToSave

  • Bristles
  • ***
  • Posts: 437
+ 1 with Bobech's input. This seems very beneficial to all parties. Also, I hate giving interest to the banks if at all possible.


Sometimes paying interest to a bank is beneficial because then the bank-- not you-- does the dirty work if someone doesn't pay. 

Bobech called partition "nuclear war" for family relations.  I'm not sure I agree.  I think foreclosing on a family member after they defaulted on payments would be potentially worse than going through partition.  If you foreclose, you are the greedy family member who won't give a break and is taking the property away. 

If they stop paying, you could be put in a position where you have little choice but to foreclose.  Be very careful with seller financing, and go in only if everyone has eyes wide open and you have little doubt that you will get paid.  Definitely do not get into a seller financing situation if you are doing so because someone cannot get bank financing.
« Last Edit: April 11, 2016, 02:12:22 PM by AlwaysLearningToSave »

Cassie

  • Walrus Stache
  • *******
  • Posts: 5527
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #10 on: April 11, 2016, 01:49:07 PM »
I am guessing that there is no way the other family members are going to sell to family for a third of what the property is worth.  YOur inlaws will probably be forced to sell and that will take you off the hook.

AMandM

  • Pencil Stache
  • ****
  • Posts: 856
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #11 on: April 11, 2016, 02:22:20 PM »
I'm a little confused.  You don't want the responsibility of upkeep,...  don't you already have it? At least that's what I took from you saying utilities etc. were split among all the family.  A lot depends on how well you all get along, how much you trust each other, how financially responsible everyone is. 

What if, instead of buying their kids' shares, the parents pay for all the maintenance?  (Or maybe your wife pitches in since she uses the house, too.)

The really ominous thing to me is the thought of your in-laws dying, your siblings-in-law wanting to sell, and your wife wanting to own the house alone.

plog

  • Stubble
  • **
  • Posts: 212
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #12 on: April 11, 2016, 02:24:08 PM »
2 words:  Jewish Lightning.

[MOD EDIT: Forum Rule #1.  Please don't use racial slurs/offensive racial stereotypes.] 
« Last Edit: April 11, 2016, 03:11:31 PM by arebelspy »

gaja

  • Handlebar Stache
  • *****
  • Posts: 1194
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #13 on: April 11, 2016, 02:39:22 PM »
My grandmother died some 25 years ago, and the five kids had to deal with the house. It is a summer paradise, easily room for a dozen adults plus kids. Two of the children wanted to buy it out, and this was ok with the others, until the time came to decide the price. My uncle lost the vote, and the house was sold for appraised value, not market value. The difference was maybe $50 000; enough that he felt cheated, and hated all of us until the day he died.

historienne

  • Bristles
  • ***
  • Posts: 346
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #14 on: April 11, 2016, 03:09:51 PM »
If I'm reading this correctly, the purchase decision is between your wife's parents and the rest of their family.  You are not directly involved, and I think you should refrain from voicing an opinion either way.

You ARE involved in two ways: you currently use the property, and your in-laws are expecting that if they buy the property, you will contributed to future upkeep costs.  You and your wife need to come to a mutual decision on whether (and how much) you are willing to contribute to the property going forward.  It seems fair to me that you would contribute something if you do intend to keep using it. One possibility would be to offer to pay rent for future usage, which would contribute towards costs without taking on an indefinite commitment.  If the plan is for your wife and her siblings to inherit the property someday, then perhaps it is fair that they go ahead and contribute to upkeep in the interim - although of course, no inheritance is guaranteed! 

Bottom line, this is something you need to work out with your wife and communicate to her parents.  This is not a conversation to have with her parents, nor should you get involved in their family's discussions about how to dispose of the property.

GreenEggs

  • Pencil Stache
  • ****
  • Posts: 733
  • Location: Here & There
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #15 on: April 11, 2016, 05:14:36 PM »
I wouldn't be too concerned about the situation.  They most likely won't be able to buy the place for 1/3 of its value. 

It sounds like they want something that they just can't afford...


AlwaysLearningToSave

  • Bristles
  • ***
  • Posts: 437
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #16 on: April 12, 2016, 05:40:43 AM »
The moral of this story is that if you own real estate, you should set up your estate plan to try to avoid joint ownership situations. I see lots of situations where parents left land equally to their children. Often the arrangement works... for a while. Then life happens, circumstances change, and somebody wants out. Then situations like this arise where the property that was supposed to be a benefit to the next generation becomes a big burden, strains relationships, and sometimes threatens to tear the family apart.

I have helped a number of clients work through this type of joint ownership situation on both sides of the coin. Each case was messy from a personal relationship standpoint. And in each case it appeared to me (with the benefit of hindsight) that the whole situation could have been avoided if the previous generation had made the harder decisions to deal with the issue in the estate plan instead of taking the easy route of leaving the land equally to the children and letting them fight it out.

A stock portfolio is easy to divide equally. Real estate of is not. If you have significant real estate holdings, do your loved ones a favor and figure out how to deal with it when you die. It may require hard decisions and it may require paying an attorney more than you would like to have to pay, but you will be doing your family a big favor.

chemistk

  • Bristles
  • ***
  • Posts: 360
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #17 on: April 12, 2016, 05:50:48 AM »
Thanks for the replies.

I've been very quiet about things, only letting my wife know what my feelings are when we are talking about it alone. My biggest fear is that with her family, we typically hear about things only after a decision has been made and it seems like this is the way this is going, too. Right now, we have no obligation to the property but that could change within the next couple years.

I just wanted to get a few different takes on things in case my opinion holds any clout in the matter down the road.

It looks like, if my in-laws successfully become majority owners, I'll need to sit down and discuss realistic expectations with them.

Thanks!

Cassie

  • Walrus Stache
  • *******
  • Posts: 5527
Re: Need Some Outside Advice - Family, Property, and Sentimental Attachment
« Reply #18 on: April 12, 2016, 11:19:43 AM »
If your inlaws buy the property and then expect you to help financially they will be very upset when you say no. Wouldn't it be better for your wife to let them know before they try to buy the others out that you will not be contributing or if you  do the amount?