Pay now...get property later...???

[Anonymous Poster]

Hi,

A neighbor has no kids, and is not married. He is about 60. I am a little younger.

He mentioned to me that someone "from a church" had asked him about putting a soccer field on his 4.5 acres. He said he told the guy he was not interested in that idea. But he got me worried...

I would like to make some kind of deal with him for his property. The kind of deal where he would live on it for the rest of his life and maintain the house, but I would pay some cash in advance and maybe pay the taxes on the property for the rest of his life as an incentive for him to do the deal.

I do not want to take advantage of the man. I was thinking of something like paying half the county assesed value, which was recently redone to to be actual market value, and my guess is pretty close to what actual market value actually is.

He would use the property just like he does now...has a tractor and plows and grows stuff...brush hogs...so on...would even agree that he could ban us from walking on it until he departs...

Only limitation would be that he cannot strip the top soil or do any major reforming of the lay of the land, which he has not done in the last 25 years we have lived here and I am sure he has no intention of doing now.

What do you call deals like this? How does one normally approach such a situation?

I figure I would first talk to the neighbor and tell him what I am thinking and see what he thinks...

Does this make sense?

I don't really know how to pose the question...that I am trying to ask here.

I want to stress that I am not wanting to take advantage of anyone. Just that a guy with no kids to pass things on to might be better off with some cash in his hand before he departs the planet. AND with the knowledge that he might know where his property is going to end up...in my kids hands...

I would REALLY appreciate any advice that you guys might give me on this thought...

Yes, there will be lawyers involved if this idea gets beyond first base...

The goal here is to keep things like they are until the wife and I leave the planet too! Don't want anyhing on the neighbor's property that is not there already. Unless he wants to build it for himself, then that would be ok I guess...Cause I don't expect he needs anything more than he has now...

Thanks for any advice you might have!

Bill in Pgh, PA

 

[MossRoad]

Agree on a price and buy the property in full from him now and give him a lifetime lease for $1.00 per year. Have him pay $35.00 in advance, in case he lives to 100 /w3tcompact/icons/laugh.gif.

 

[cowboydoc]

Yea I agree with MossRoad on this. You can't expect to pay less than full value. I have a small ranch that I bought next to the one I already owned. The stipulation with that was the present owner, who is 72, got to live in the house for free until he died. There are quite a few other ones like this that I know of. Usually full price is paid for it though.

 

[JohnMiller3]

Have him irrevocably deed the entire parcel to you and he would be listed with a retained life estate…

 

[Spencer]

Look up "Reverse Mortgage" on your favorite search engine.

 

[Woodbeef]

Ya,I agree pay the full price,and give him a life lease on the place. We had a deal like that on a farm when I was a kid. The guy we bought it from had a small house and a couple of acres on the far corner of the place. When he died we then could do what we wanted with the place. Until then he kept it up and payed the bills on it. Worked out real slick for him and us.

 

[TedLynn]

What you are looking at is a sale and transfer with the seller retaining a "life estate" interest in the property. Property values are seldom accurate within the tax assessor's books. The value of this property is what a willing seller will take and a willing buyer will pay. That will establish fair price, or an appraisal might help. The life estate also has value. It is based on seller's expected lifespan and the value of the property. An attorney that specializes in real estate can work these numbers out for you. These transfers are most common within families (between parents and children). Since this is not within the family, you will need to specify more details. What happens if he becomes unable to maintain the property and lives for many years. Does it become overgrown or can you maintain it? Just one of the many aspects you need to clarify. Good luck.
Ted DK 45

 

[Anonymous Poster]

Hi,

I really appreciate the input to my question!

I know there is always a gamble in these things.

Also, taxes here are pretty high. My estimate is that I would be paying about $3000 per year on that property next door, which may have a real value of $135,000. That is if I worked out such a deal.

Now I guess I could pay the full value of the place, but then who would pay the taxes? I would not be willing to pay the full value and the taxes both, while someone else had control of the property. That would not make good sense to me...if I could get that kind of deal myself I just might take it! Taxes are really high here close to the city.

Now I guess I could offer full value with the stipulation that my neighbor pay the taxes. But I also need to consider the fact that there is no real way I can ensure that he would maintain the house that is there...so would it be the full value of the 4.5 acres without the house? In that case maybe the value of the property alone is only half of the total assesment.

By the way, there was a county wide reassesment here in 2001, and believe me most properties were hit hard and over valued rather than the opposite.

So in that case I could be on target in what I am thinking...

I know there are reverse mortages...but I don't think they pay a lump up front, although I guess you name it and it can be made to happen.

What I think I am hearing is that one option would be to pay full value, and let the owner pay the taxes until he expires.

A second option could be my suggestion of paying half and my paying the taxes on the property for the rest of the current owners life.

Are there other options that I am missing?

I do know about mortality tables and that life expectantcies can be calculated...but they are only right on average and not in one specific case.

In my mind there has to be some sort of discount taken into account if one is giving money now for something that will not be delivered until later. Yes, I know, the real difference is that which is between expected growth in the money given as compared to the expected appreciation of the property!

Man...I wish this was easy to calculate. And the taxes are a significant variable too.

I guess I better just go over and talk with my neighbor, see what he thinks and work out the details later. I would like to offer some reasonable starting point though.

If anyone has further comments/advice I would REALLY appreciate them!

Sometimes it is hard to be objective when one has a personal interest in a subject!

Bill in Pgh, PA

 

[Woodbeef]

I must be missing something here. You want to lock up someone else property today,for future ownership but not pay today's value for it,let alone what it is worth in the future?

You are also already saying that you do not fully trust your neighbor to keep the place up,so why should he trust you to pay the taxes each year?

He might also feel you are trying to get over on him with your 1/2 price deal.

Why not buy the place outright,and rent it back to him?

 

[MikePA]

<font color=blue>Woodbeef wrote: Why not buy the place outright,and rent it back to him?</font color=blue>
I agree with Woodbeef...Forget the complicated pay half now and all the clauses about keeping the property maintained and make him an offer to buy the property now.

<font color=blue>macher wrote: Does this make sense?</font color=blue>
No offense, Bill, but, no, this doesn't make sense. Put yourself in your neighbor's position. Would you sign a 'semi-sales' contract for your property that's got a number of use clauses? If he still owns the property, then he is responsible for the taxes in the eyes of the county. What if you don't pay the taxes? What if he wants to make some changes to the property? Does he have to get your approval?

Even if you could find a lawyer to write such a contract, if I am the property owner, I wouldn't sign it.