Buying a family member out of a shared property inheritance

[Alexander Straffin]

Hello all,

My brother and I inherited some land in Vermont from our late grandmother. We have come to a verbal agreement as to how I am going to buy him out of his share.

The deal is that I will pay a sum of money on a note that he holds tied to another asset over the course of two years, and when complete we will execute a quitclaim deed assigning full ownership to me.

I am looking for advice about formalizing this agreement in the best way possible so we are both bound to the terms of the agreement.

Is there a standard for this type of transaction? I can find the legal boilerplates and can get some assistance in properly executing the agreement, but I am not sure where to start. We would like to avoid involving lawyers if possible.

Any guidance with regard to the type of agreement we should use would be greatly appreciated.

Thanks!

[Anna Laud]

@Alexander Straffin

Hi Alexander! 

So without going the full on legal route, I'm wondering if you could make things a lot easier for yourself maybe with going about it as if it were held as an LLC (even if it's not). So assuming that you and brother are 50-50 spilt on this property, you each hold (currently) a 50% share as joint shareholders/partnership.

To proceed in complete asset division of this and keep it fair as possible (without professional legal involvement)  it seems like it might be best to have the property independently appraised (this would be at your cost it seems, as it's on your end to choose to buy out brother if I have it right) and move forward with this information as an official sale- moving it into a land contract maybe. 

I would keep it as non-verbal as possible and always move towards get it in writing; For sure not naysaying any family dynamic here, but who is to say what happens within a two year period, and nothing verbal will hold in court. This could be anything too from someone getting hurt as the are trespassing on the land, suing and you both trying to claim less ownership over it in damages to be compensated (does not have to be about brother alone is my point!) 

You could draw up land contract yourself, no issues or professional help needed there. This way would possibly be easier in making installments over time- rather than the lump sum? Also executes the 'in writing' portion

Now it might be easier to actually get a loan any buy him outright from the start- unless your Grandmother's estate is taking care of property taxes, insurance (well that's just me assuming agricultural/tillable ground and not accounting for a dwelling at all) 

I say easier with one thing specially in mind, using a HELOC to buy brother out now. If it's not currently tillable ground and it's just sitting land without a plan in mind (apart from apperception, as we all desire!) you've got what most lenders would consider a speculative investment and that might be harder to get behind and back.

If you were able to get a HELOC, those rates should be pretty good (obviously credit, DTI, etc factored in ) and might be affordable enough to manage payments on while you get full and instant ownership of this land.

In a nutshell, 

1. Nothing as a verbal agreement is usually ever a good idea, even with family. 

2. An independent appraisal provides you with true declaration of value - neither brother, nor dependents, nor brother's spouse could ever come back and say they were "shorted" on the deal. Value was determined and paid for, period. 

3. Consider land contract on his appraised portion to make installment payments, and move % of ownership accordingly (again it seems from your post this would likely  never happen, but just in case)  a judge would see you had made "X" amount of payments over however many months IF something did happen to bring ownership into question 

4. Alternative means of purchase; HELOC if possible

Now one thing to consider here that I'd be happy to chat with you about in greater detail if you'd like is alternate ways to have your portion of the land income producing (if this is indeed a 'speculative investment scenario) 

- RV winter storage 

- ATV storage 

- POD storage 

Basically there are endless ways to have some income coming in IF this property isn't already producing for you and isn't tillable, and I can help you figure that out if you'd like. This is just coming from experience- I'm president of a family farming corporation on one of my farms, and part of it has some non-tillable acreage I wanted to still generate income on. 

Anyway, I hope some of this helps!