I have a complicated question for the CC Brain Trust. There might be no good answer, though.
Our elderly neighbor of one of our forestry properties has approached us to buy his property. We definitely want it, and his price is fair. But he wants to keep living there until he passes away (age 89, not too healthy). His only heir is his sister in another country, and he wants everything in cash/funds so it will have her as a beneficiary and the estate won’t have to go through probate, as you normally would with property.
But we don’t want to just give him the money, potentially not have ownership for many years, while we pay property taxes and insurance, etc.
The options we gave him were:
We pay his price, but he pays us a reasonable rent to cover costs.
We give him a lower price to cover potentially many years of costs.
He can get a Transfer on Death filed so the house can go to his sister, and since she definitely doesn’t want it, she could sell it to us and we take care of all fees and hassle.
He is not interested in the first two options, but maybe #3, though it is probably confusing to both him and his sister. He has some friends helping him with this. Option #3 could still be quite a hassle for all of us, though. Does anyone have an option #4? We are absolutely desiring to be fair and are completely ethical. We want a win/win situation, but don’t want to pay a bunch of money and have no access to our property for who knows long.
I actually have no idea what a life estate is, but I’m gonna google it. We probably should talk to a real estate attorney, as our neighbor has likely not.
Okay, looked it up and it actually looks a lot like a Transfer on Death Deed, though the TOD sounds like a better option for him. The TOD also avoids probate.
Think my legal plan covers a real estate attorney, so I’ll look into it. I just don’t see any better options, though.
if he’s not interested in 1 or 2, I’d walk as ‘his price is [not] fair’ to you. Either he pays a discounted rent (#1), or he lowers the selling price (#2), to account for the fact that “your” new place/land will still be occupied (by him) for perhaps years after closing.
He could pass next month or live to 105.
edited to add: there is no guarantee that forestry laws won’t change…
There are some major differences, but do discuss with a lawyer! For example, a life estate deed is irrevocable but a TOD deed can be revoked. I was thinking along the lines of split ownership: you buying the remainder interest in his property and him keeping the life interest. As a life tenant, he can’t be kicked out like a simple renter, which is probably one of his concerns.
It’s tough to figure out fair market value for this type of property, but I’d guess he’s offering it for 200K less than it’s worth. And also including all of his possessions.We would donate all his interior items (because who wants that), but he has a wonderful amount of farm and shop equipment that my husband would love. And of course, this property is more valuable to us than your regular person due to access to parts of our property, there are some unbelievable old growth trees that we would protect, and likely we’d subdivide and offer my sister the house (they would probably jump on that).
According to us friends, he is very stubborn and set on his price, and we would be fine paying that.
I’m not sure that he’s concerned about being kicked out, but he has never been a renter, and his friends said they think he doesn’t even understand what that is.
As far as the life estate, I guess you’re saying that he maintains ownership until he passes away, and then we get the property? Which sounds good, but if we just gave him the money outright now to do that, I dunno, seems there’d have to be a lot of trust involved, and what if someone sues us or laws change? I don’t think we would be comfortable giving someone so much money without possession.
I would do #1. The terms can be clearly spelled out and easily understandable. Expectations of costs and expenses can be pretty much predictable. You can make plans for the lot and house and stuff for the future, while he still pays some expenses. You don’t need to worry about someone else swooping in and buying or developing the property. You indicate it is already probably a pretty good price for you. It’s likely to be a simple and clean progression when he leaves the property.
then it sound like a reasonable deal. Go with a sale, and give him a life estate for the house, a barn/shed, & equipment (that allows you to access and change the land/trees as you see fit.). All equipment to convey. List the equipment out.
Definitely engage a RE attorney who specializes in forestry and rural properties.
not a lawyer: life estates are usually among parent/kid (heirs). Perhaps the atny can suggest something else,
With the life estate idea @BunsenBurner had, and all the other suggestions you all have given, I’m wondering if this might be option #4.
This might be a win/win. Do two separate deals. Buy his house and exterior equipment for his price. Clean deal, we own it, done. At the same time, draw up a contract that we don’t call a rental agreement, because he doesn’t like the sound of that and actually flinched when my husband mentioned him being a renter. Make it so he has the right to live in the property for life and use all his exterior equipment. But he also has to pay all expenses to maintain the property, including real estate taxes and insurance. There’s got to be some sort of name for that contract. With the life estate, it sounds like we wouldn’t even own it until he passes away (though we would have paid for it), and potentially he could borrow on it and have liens, and promise it to others (though those promises would mean nothing). Apparently he has changed his will several times, and I don’t want anyone to even attempt to cone after us for the property.
Not a real estate lawyer either, so I agree Bus needs to consult one to see if it is even possible in her situation.
I wouldn’t do any TOD kinda of arrangements in this situation because there is a good chance the man could change his mind as experience shows (him changing his will etc.).
Life estates can be tricky. Consult a lawyer. Or two.
My father defined a life estate for new wife when they married and wrote wills. It’s a definite worry because there are no further words to clarify that it would be her that needs to cover expenses, repairs, taxes etc. And he never realized she could remarry and stay. Or she could rent out part (or all?) of the house. It’s especially awkward since only his name is on the deed. The will generally defines splits assets between wife and the 6 grandkids. This could be really messy someday - should have been set up with via a trust. I envision lots of work and possibly family drama if they are still in the house when dad dies. My hope is the wife would want her cashout, agree to sell to avoid expensive and stressful home upkeep.
Yeah, I think I just want uncomplicated. Clean buy of the house, and contract that is basically a lifetime rental contract, without saying the word “rental”. Knowing this guy, he would put some of the money we gave him for the house doing his engineering projects fixing any problems. It is quite impressive the things that he’s done.
Not a real estate lawyer either, so I agree Bus needs to consult one to see if it is even possible in her situation.
Knowing this guy, he would put some of the money we gave him for the house doing his engineering projects fixing any problems. It is quite impressive the things that he’s done.