Need Advice. Please help. - Posted by Bret

Real Estate Investing
1

Posted by Clint on May 21, 2006 at 21:45:56:

Here is how I see the numbers:

Realtor fee at 400K: 24,000.00
Your down payment: 10K
Your sprinkler invest: 5K
Your total out of pocket: 15K

You owe cousin 15K for remainder

400K
-24K fees
-15K to cousin
361,000 (you and cousin now split the 1K…)

You may be better off to just walk away. And chalk it up to a bad experience. Your house appears to be over priced for what you all put into it; it appears to me to be a house you live in, not one you speculate on and make immediate money.

The math doesn’t look very good for you.

Best of luck!

Clint

2

Need Advice. Please help. - Posted by Bret

Posted by Bret on May 17, 2006 at 20:26:41:

I bought a house with a cousin about 2 years ago. We are 50/50 partners in the house and are both on the mortgage. We have not been getting along and have been trying to sell the house for almost a year (with no luck).

Here are the facts:

Purchase Price: $360,000 (New Construction)
Invested into house: $40,000 (completing the basement, upgrades)

If my cousin buys me out for $390,000, what extra costs will be incurred (i.e. Closing Costs? Lawyer fees?, etc.)? I am trying to get to a bottom number and am not familiar with the process.

I was also wondering what other paths I can take if he refuses to buy me out? I am not in the financial situation to buy him out and the house doesn’t seem to be selling, but I can no longer live with him. Any advice would be greatly appreciated.

3

Re: Need Advice. Please help. - Posted by Clint

Posted by Clint on May 17, 2006 at 20:57:59:

Advice,

Too late, but advice point number 1: Never, let me repeat, NEVER, do business with family or freinds.

I take it the 40K is “out of pocket” and the $360K was a 100% loan.

This means you have 400K into it.

  1. How much is your half?
  2. Did you put $ down?
  3. Did you put $ into the ‘finishing’?

Yes, there are always fees, but all fees are negotiable; you may want to mediate this.

If your cousin ‘buys’ you out, what exactly are your numbers?

Your cousin will pay transfer taxes, deed prep, you both will have attorney fees, if you don’t use the same attorney to handle closing; title insurance binder, et al will be his expense.

Write the contract, as “buyer pays all closing costs”

taxes that are pro rated should be split and you might get back some of your tax $ too.

Now for the dirt: if he refuses to ‘buy you out’ you can get an attorney to force a partitions suit, it isn’t cheap, and it isn’t quick.

May I suggest, you find a mediator, and go that route.

Don’t get greedy, let the chips fall where they may. Like it or not this cousin is still related to you. These little things have a way of creating a huge rift in families, particularly when it comes to reunions.

Suggest that the both of you do the following:

drop the price - if it isn’t selling it’s too high.
Use a realtor, get some comps, and find the ‘real going price’ now

Chalk this up to a bad experience.

Let the other guy win (it may be the buyer/it may be your cousin) but you’ll both get out.

Best of luck!

Clint

4

Re: Need Advice. Please help. - Posted by Bret

Posted by Bret on May 18, 2006 at 18:03:02:

Clint,

Thank you for the great advice. Somebody warned me not to buy a house with family, but I didn’t listen. Boy am I sorry! Here is some additional data:

  • Purchased for $360,000 ($180,000 is my half)
  • We only put about $20,000 down total ($10,000 is my half)
  • Interesting story with the finishing: We put about $10,000 into things like sprinklers, fixtures, etc. Our plan was to finish the basement and rent it out for income . Since I didn’t have any additional money to do the basement, my cousin fronted all of the money (about $30,000 – half of which i owe him). BTW, it’s so high because he supposedly had experience w/ Real Estate, so I let him run the project and hire subcontractors, etc. and it was my fault for not staying ontop of what he was spending.

I like the mediator route. I am definitely not one for family rifts and would like to put this behind me, but cannot do that until we are no longer living together. It is not at all a priority for my cousin to move out. He is perfectly happy having someone clean up after him all day and night.

We had our price listed with an agent at $420, then moved it down to $409 which is right in line with comps. We’ve had no bites since December and the contract is up at the end of May. After that, I might ask to see if he wants to buy me out again and if not, drop the price again and list with another agent.

I am already prepared to “let them win”. At this point, my sanity is worth more than winning. Thanks again for your advice and I’m looking forward to your response.