So Mom has passed away and it is time to value her summer house. Everyone seems to have a different opinion about what it’s worth. Sister one says it’s worth a fortune given the neighborhood and the acreage. Sister two says the housing market has brought the value down at least 20%. Brother is married to a realtor who says they are both wrong and need an independent appraisal. How to settle the house value once and for all?
Keeping the House
If the house is staying in the family it will need to be valued for estate tax purposes and also to calculate the “buy out” share for any siblings who prefer to “opt out.”
The best way to settle valuations is with an independent appraiser, but whose? Sister one has a friend who can do it cheaply. Sister two lives far away and does not trust sister one. Brother wants to get a fair appraisal and not get an earful from his wife.
Well, first of all stop squabbling and start solving!
Appraising the House
Real estate appraisals are cheap. They are also tax deductions to the estate. Agree with your siblings to spend up to $500 on each of three appraisals. Sister one chooses her friend, sister two chooses someone she was referred to, brother chooses his wife.
The three appraisals are due in 30 days, in writing, with comparables. The three will be averaged for a final valuation.
- Appraisal 1: $1,250,000
- Appraisal 2: $1,400,000
- Appraisal 3: $1,395,000
Average valuation: $1,348,333. This is the amount reported on the estate tax return. It is also the amount used for any buyout (e.g. sibling sells his or her share to the others for $449,444).
Why are the values so similar? Because the neighborhood comparables are the same! Any fluctuation higher or lower is generally the appraisers view of the condition of the property such as age, needed repairs, etc.
By the way, brother’s wife did not charge for her appraisal and sister one’s friend charged half price.
The total cost of the appraisals was $750 — far less than the cost of fighting it out!
The benefit of including all participants in the process — priceless!
Why would any sibling want to sell out her share?
- Lives too far away to use it
- Children grown, live far away and won’t use it
- Shared upkeep costs of house too high (e.g. property taxes, new roof, etc.
- Too many scheduling complications, not worth it
- Have our own summer place
- Prefer to travel to different places each year
Selling the House
If the house is directed to be sold or if the siblings agree to sell it, you would follow a similar approach.
Each sibling chooses a listing agent who provides a selling proposal (essentially a free appraisal plus marketing plan).
The siblings vote on the strongest agent / proposal and the executor then retains that agent.
The housing market will determine the final sales value but for now you have gotten the process moving.
Just remember to be creative, be collaborative and respect others’ choices!