Dear Monty: My mom’s home was transferred to me from the court in probate for a certain amount. I am selling it to my son. It needs some repairs and updating. I am not looking for profit, just fairness to my other children. What would be a fair price to ask?
Monty’s Answer: Before answering your question, there is background information to provide you and questions for you to answer for yourself. Every family is different, so it is likely that no matter what you do, it may not be considered fair by every sibling.
Additionally, the number of children you have affects fairness in different ways. From a financial point of view, the larger the group, the smaller the share of each of them. Secondly, the larger the group, the higher the chances of dissension. Finally, as the home’s value rises, the economic effect on each offspring increases.
A Question for You
Has the home been offered to all the children? You could be seen as unfair if it hasn’t been offered to one or more of them no matter what you do. The age of these children may mute the concern. For example, maybe your son is the only one out of school and working. If your son is the only child that raised their hand, and the others could buy it, then it’s not an issue.A Fair Plan
No. 1: Have the home inspected before hiring an appraiser. Your son likely never lived in the house. There could be other issues that you are unaware of that affect the value. So, in fairness to your son, a home inspection better prepares him to own it.No. 2: Engage an appraiser (not a real estate agent) who isn’t familiar with your family members. Share the inspection with the appraiser. A paid opinion from a non-family member provides a better idea of what you can consider fair. The other benefit is that this action shows your other children how you established fairness. No complaints that you gave it away.
No. 3: Specifically, order the appraisal with an “as-is value” and an “as-improved value.” This action means you want two prices. Some appraisers may not do this type of appraisal because it requires a bit more work.
No. 4: The appraisal is just one skilled person’s opinion. Here is a link to a Dear Monty article explaining how an appraisal is just one opinion: Bit.ly/3EkgUSQ
No. 5: Consider a range of 5 percent above the appraisal or 5 percent below the appraisal. A price anywhere within this 10 percent range is likely a fair price. Using the value of the “as is” valuation determines the correct value.
This advice may sound a bit extreme to you. It might be more than you need because you know your children and I do not. On the other hand, you may have reached out because you do know your children and anticipate there could be some dissension. Every family’s situation is unique. After advising families to dispose of inherited real estate for years, I have learned that handling estate proceeds can bring out the worst in people when money is at stake.
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