Sorry, this is a bit long, so I won't blame you if you skip down to the dilemmas & questions at the bottom due to TL;DR
The backstory: About 15 years ago my siblings and I inherited several pieces of real estate from an uncle who lived in another state at 20% each as there are five siblings. We all live in various states in the USA. We have sold all of the real estate except one piece that's currently on the market. Sibling A is the executor of the will, and takes care of the various things that have come along since the uncle's death (minor payments from various class action suits due the uncle having worked on and retired from the railroads), and we each pay our portion of the taxes yearly, a very small amount.
The problem: Sibling E is in dire straits and desperate to sell the property to keep a roof over their head (just them and a useless SO that I don't believe contributes to the rent, but not sure). They are asking if any of the rest of us are willing to buy them out of their 20% of the property. Sibling A (the executor) has been paying sibling E's rent for the past two months with the stipulation that the rent is simply an advance on sibling E's eventual proceeds from the sale of the property. So effectively there is a verbal contract between them regarding the future sale of the property.
The property: This is a few acres of basically rural mountain top property with road access to the bottom and little else with a current asking price of $57k . Hence, it's not a very attractive piece of land, although it is in proximity to a large metropolitan area, so it could potentially be developed into half a dozen condos, or one large estate with great views, but lots of problems to be solved before either is possible. I've considered buying all my siblings out to attempt the condos idea, but don't really have that much free cash to do so.
My dilemmas: I am the only one in the family who has the wherewithal to purchase sibling E's portion of the property. However, there's already the verbal contract for roughly $2000 that sibling A has given sibling E to pay their rent.
Real estate fees are going to be 10%, so at best at our current asking price (which we're unlikely to get any time soon based on past experiences in this rural area), my siblings and I would be splitting the proceeds of $51.3k, or $10.26k each. That would leave sibling E with roughly $8.26k.
I'm considering offering them $4k with the rest contingent on the sale of the property up to a maximum of $7k if we get a full price offer (very unlikely) and less if the property sells for less (which is what I expect it to do, especially if we try to sell it quickly, which is what all my other siblings want to do). That really only leaves about $1k left over after sibling A gets their $2k back, and that assumes a full price offer. This would all be in a written contract spelling out how the final payment would work depending on the sale price, real estate fees, filing fees, etc.
It's possible if we end up selling the property for much less than we expect, I could end up in the hole, and there would be no contingency money for sibling E at all. I'm actually OK with this scenario up to a point, but that would also leave sibling A out in the cold as far as repayment of the verbal contract.
And lastly, sibling E has a long history of poor decision making, so at best this is only going to be a stop gap for a very short period of time until they're looking for their next out.
My questions:
- Do I have any responsibility toward the repayment of the $2k loan from sibling A to E, or is that their own problem to work out? I don't want to financially hurt either one of them, if sibling E wasn't in financial straits I wouldn't even be considering this deal, I'd be content to sit back and let the property sell whenever it sells.
- Is this a wise thing to do? Buying land never seems like a bad idea, but buying a portion of land that I know is unlikely to sell anytime soon, from a sibling solely because they need the money doesn't seem like the best plan.
- I'm sure there are other pitfalls I haven't considered, what am I missing should I want to go through with this?
- I'm willing to take a financial hit of several thousand dollars over time to help out my sibling, but I'd prefer not to.
- I've considered a one-time buyout of sibling E for $6k with the stipulation that the verbal contract is taken care of by this amount (leaving sibling E with roughly $4k, and sibling A made whole). This way I assume all risk with regard to the sale of the property, and the two siblings are no longer party to the verbal agreement (sibling A & E), or the property (sibling E). If the property sells for less than we're asking (almost a certainty), neither of them are affected by their current agreement.
Update: I spoke with sibling A at length tonight. We're going to reduce the asking price on the property tomorrow morning to see if we can generate some interest. I'm not hopeful, I looked at the hit numbers on the real estate agent's site since the original listing a few months back and they tailed off pretty quickly. I'm expecting the same again, but we'll see.
We also discussed some options for an outright buyout for the $6k amount previously discussed here. One of their suggestions was to deposit $1k/month in sibling E's account for four months instead of a lump sum which would likely disappear very quickly. I'm of two minds there, one I'd like to just be done with it, but on the other, I'd be assured that my sibling had a roof over their head for the next several months.
Epilogue: The property sold at auction today for about $20k. After fees, reimbursement for the survey and cutting in a road, we'll split about $12k between us, which means sibling E basically gets nothing, or possibly is still in debt to sibling A. I don't know the details of their deal. I'm glad I didn't decide to buy them out, it would have been a losing prospect.
