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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.

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    If you do buy out E, what are the chances one or more of your other siblings comes to you and says "Hey, I need money too! Buy me out!"? Because there seems to be a very small upside (you'll help out E but only for a short period at which point they'll still have to face harsh reality), and lots of opportunity for hurt feelings, I'd recommend doing nothing. If you do feel the need to do something, I'm with Pete, take the last option, but do so buy paying A and E separately, so A's for sure made whole (and of course make that a stipulation up front). – blm Oct 15 '15 at 19:07
  • @delliottg This bad situation is over, be thankful for that, and you got some cash out of the deal. You can now move on with your life. – Pete B. May 8 '17 at 11:48
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To answer some of your questions:

I like the last option you presented. You become a 40% benefactor of the land, for 6K. 2K goes to sibling A (who should be made whole no matter what is done) and 4K to sibling E.

Along these lines, you could offer A, B and C an offer to buy 5% additional stake for 1500. If they all agree, you, B and C would pool, 4500, giving A 500 and the remainder to E. As you said, they may not have the ability to cough up 1500 (I am sure A would be willing), but they were given the chance so there should be less possibilities of hurt feelings. Also if any do say yes, it mitigates your risk and outlay.

Some might say that 6K is unfair to offer E. $6,600 would be about a 20% discount which is fair and normal for the assumption of risk. However, in this case it really doesn't matter. Is 4K really going to change their life? Probably for only a very short time. The difference between the two figures ($600), even less so.

And I think that is really the crux of the issue. Is this a huge money making opportunity, probably not. Is this truly going to change E's behavior (and it is a behavior not a math problem), probably not. So despite having noble intentions, this is just a crappy situation. And really what is to stop E from suing the others if they do not get a full share?

So another option would be to sell now, for whatever price the land brings and be done with the situation.

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    After writing it all out and reading your responses, I'm starting to think I'm inclined to the "fire sale" option, sell the property, get what we can for it, and any of my proposed "solutions" to the problem will no longer be an option. You're correct in that a few grand isn't going to solve the greater problem, it only staves it off for a few more months or so. As regards buying out the other three siblings, I haven't ever broached that, I know at least one other would be very happy to get the extra cash, but they're not hurting like E is. – delliottg Oct 15 '15 at 20:24

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