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My wife and I have the option to buy out my late mother's house from my two siblings; we currently are in the process of inheriting it jointly. They would like to sell the house to someone as soon as we can (which may take weeks to months to get ready), and it was discussed that maybe I could buy it. We will need to get an appraisal or two to get a fair market value, which, if I buy it, I will give them 2/3rds of for the house. It would be my and my wife's first house purchase. We're not sure this is the best decision anyway, but want to put out a call for more perspective from r/personalfinance.

Possible Benefits (I guess?):

  • We three siblings would not need a realtor, and would save on their fees.
  • They also said they would give me the lowest fair price.
  • We trust them as sellers. :D
  • They would be pleased to keep the house in the family.
  • I and my wife are currently staying here and so would not need to move.
  • I trust the house as far as I know it.
  • I already am familiar with the house's pros and cons.
  • It would also very likely be easiest for me to come to own a home this way, since I do very poorly with purchases with people I don't know.
  • I also would be getting it for 33% off, and am not an investor (yet?) and so if I instead took my 1/3rd of the sale profits, I wouldn't be doing much with that cash anyway (although could, of course, put that toward a different home at some point).

Downsides?

That all said, there may be downsides that I am not aware of. The ones that I am aware of, are:

  • The house may be significantly more expensive than we would normally be thinking about, by a factor of 1.5x to 4x, depending on area of the country. It is therefore expensive both in the buying price and the property taxes.
  • The noise scene here is not optimal; though many places would be similar, and I am sensitive.
  • The psychological associations with my mother and her illness/passing is strong for us, so it may be difficult to feel comfortable here long term (unknown). (Not a financial aspect, but I thought I'd put it in there).
  • We're not "in love" with this house, though it has many benefits. We don't feel we need to be in love to buy a house, but I'm wondering how much I'd want this house if I didn't have this "greased chute to buying", and how much I should factor that in.

What other financial issues to consider?

So, are there any other considerations that I should be...considering...in this type of scenario? Anything that might be cause for rancor, difficulty, financial hardship on any of our parts, or anything else? I'm particularly interested in financial blunders that this could cause.

  • How would you get the money to buy the 2/3 share of the house? Cash already on hand? Other funds from the inheritance? Selling other investments? Or would you need a mortgage on the house, or some other sort of loan? – Nate Eldredge Oct 17 '15 at 23:48
  • @NateEldredge Cash is likely. – Manbatton Oct 18 '15 at 1:27
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    You are not getting the house for 33% off. You are spending your inheritance on that 33%. If you don't purchase, you would get that as cash in your pocket. Minus your share of the fees you'd all pay by selling to someone else, of course, but you've already got that listed as an advantage, so no double dipping. – Aravis Oct 23 '15 at 21:57
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I think that the fundamental question you need to ask yourself is, "Would I buy this house if it wasn't for the circumstances? If I could buy this house for a 33% discount from an unknown seller, but knowing what I know about this house today, would I?"

From what you say in your question, it seems like the answer might be No. You say it's 1.5x - 4x more expensive than what you'd normally be considering, and you have some concerns about the noise.

Other questions to consider:

Are you planning to live in that area for the next several years? Is this a neighborhood you'd like to live in?

Are your siblings likely to respect that this is now your house? Or are they likely to continue thinking of it as "Mom's house" and potentially take some liberties that they otherwise wouldn't?

If you do go ahead with the purchase, you will (as you say) save on realtor fees, but I'd recommend not skimping on other fees. Make sure you take care of the purchase paperwork properly and get the title registered properly, ensure that you get title insurance, etc. Even though you're dealing with family, you'll want to make sure everything is clean.

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    I'd say especially since you're dealing with family, you want to make sure everything is clean! – user32479 Oct 20 '15 at 17:17
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    I have one recommended change - you say "Would I buy this house in different circumstances, at a 1/3 discount?" instead, you should say "Would I buy this house for full value?" Because you get the 1/3 value either way. Either you sell to a 3rd party and get cash, or you buy from your siblings, and get it in house. Same $ value, either way. – Grade 'Eh' Bacon Nov 16 '16 at 23:06

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