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

[8NTX]

I have to agree that this kind of deal will be hard to do, especially at any number below full market value. If you plan to pay cash, your deal has a little better chance, if the guy needs the money. If you plan to get a mortgage to finance the purchase, very few banks or mortgage companies that I know of will be willing to finance a property encumbered with a life estate or rent-free agreement. The ability to foreclose without restriction is essential, unless additional collateral is pledged.

 

[Anonymous Poster]

Hi,

I guess I should have asked my question differently!

I know people make arrangements of some type that work out for both parties over periods of years. Eventually, property ends up in one person's hands, and for that result the first person paid something.

Now I don't know the details of how this is done normally. If there is a norm...

Let's say for example, I could use some extra cash now and was willing to make some arrangement that would give me some money now and maybe other considerations, and in return, after my death, my piece of property would end up in the other party's hands.

What terms would be fair in such an arrangement?

Say for the sake of discussion, my house and land were worth $100,000. Should I expect someone to pay me the full $100,000 today, pay the property taxes every year, and get nothing in return except the property when I kick off? After maybe 25 years?

During that 25 years, the person who gave me the full value for my property would lose the use of that $100,000, fork out an additional $2,400 per year in taxes, and would not be able to use my property in any way...yet he could spend that same money and buy something else at full value, and use if for 25 years...

So it would seem to me that if I were to make some arrangement with someone for the "future transfer" of my property, I should expect to receive less cash in hand for my property that its full current value. Even if there was a sale/lease back agreement, the real transfer of the use of the property would not occur until later...perhaps decades later...when the original party passed on.

I do need to emphasize I don't know how these things are normally done.

By the way, I DID NOT say I did not trust my neighbor or anyone else. I just know what life is like. People are not always able to do what they intend to do, etc, etc. Nothing is always the way we would like it to be, all the time. So I tend to be realistic, rather than distrusting...

This idea may simply be a pipe dream in reality. But I still would like to know what would be fair and how these things are done.

As mentioned above, there are trusts and lease back argeements that can be made...these things are done I know. I had in my mind the idea of a sale/lease back idea. Simple is best. What is the most reasonable way to approach a situation like this. Just for the sake of discussion. What would you feel was fair and just to both parties?

In my mind, if I had no one to pass my property on to, and was in a position where I had a limited, fixed income...and someone offered me half my property's market value and gave me the right to live on it and use it as my own for the rest of my life tax free...well, that would seem like a fair deal, considering that taxes are pretty high here [school, county, etc] at about $200 per month per $100,000 of property value when you add them all together...

Like I said in the beginning...I am not looking to take advantage of anyone, just to understand what might be a fair deal for both parties if such a deal were ever struck.

I guess in the end it may be smarter just to wait and bid on the property when it comes on the market someday...

I don't mind anyone telling me I'm nuts! That is why I posted the question in the first place, to get all the input I can. I have learned a lot here at and do appreciate any and all advice/comments.

What do you think a fair deal would be for both parties?

Bill in Pgh, PA

 

[ebeacham]

Macher,
What you really need to look at is your neighbors position and yours. The way I see it, It would be in your best interest to pay today's value and lease it back to him for approx. what the taxes are per year. I know that you would like to get it at less than market value but the alternative may be much worse. If he dies and the state auctions it off to a developer and you have a bunch of Condos going in next to you.....
Or he could donate it to a Church or charity, then you may have that soccer field you didn't want. The reason I mention this is because he is old and has no heirs gives him MORE flexibility to do what he wants with the land. If you anger him with a "bad" deal, he may just do something to piss you off.
Just my 2 cents ( really worth 3 /w3tcompact/icons/grin.gif )

 

[Anonymous Poster]

Ted, John and all,

I will be looking into the "life estate" that you mentioned...thanks for pointing me in that direction.

Bill

 

[Anonymous Poster]

Woodbeef: Hi. You're right. The way I would structure it would be via renewable purchase options. Set a fair market price (or even a bit higher) with an option to purchase at that price from the guy (or his estate) which Macher can renew (at Macher's option) each year for 99 years (or whatever). Macher pays the guy $xxx each year for the right to purchase the property at the agreed on price. He would also need a right of first refusal in case the guy tried to sell it to someone else. That way the guy has liability for taxes, suits if anyone trips & falls, etc. etc. Yet, Macher has access to ownership at any point in the future he decides it is time to exersize his option. Macher can easily check at the county courthouse that the property taxes are being paid each year. Since he lives next door he can monitor what's going on. This gives the guy money each year, relieves Macher of the myriad problems/liability of ownership, yet ensures that Macher (& his kids) end up with it. If the guy needs money up front, Macher can lend it and hold a mortgage on the property. I about gagged hearing about $3,000 in annual extortion by the local government on a property of that value. Seems like the "mafia" got its start going around to local businesses and threatening them with violence if they didn't pay protection money. Some of what they collected went to "needy" families in the neighborhood-so they could point to their "good deeds". But, my understanding it was a little easier to negotiate with them than the "official" collectors of protection money who do exactly the same thing under color of law. Oops, sorry. not supposed to discus politics. Hope no one is offended and removes the post. John

 

[Anonymous Poster]

Ed,

Thanks for that idea. That might work for us.

I think I will just give him a call and discuss the matter and see if he might be interested and then we can talk about details like how and how much.

The alternative you have proposed is just the kind of input I was hoping to get. I had not looked at it from that perspective. Even if in the end it worked out to be equal, what you have suggested would probably just feel better.

Thanks for a great idea! Sometimes an obvious alternative is not so easily seen.../w3tcompact/icons/smile.gif

Bill

 

[cowboydoc]

I think what's really being missed here is does the guy even want to sell the land? Is he hard up for cash? Does he live on a fixed income? All of these questions come into play. The only people I know that get into these kind of situations are either people that need money or a way to pass land onto family and avoid taxes.

If the guy is well off and not hurting why would he even think about something like this? I know I wouldn't and I know most older guys wouldn't. They like their freedom and don't like hassles. I know if someone came to me and said they wanted to pay me half of my proposed value what possible incentive does that give that person to sell? Why not just sell it for full value and use that money to buy another place at half of this value somewhere else? The guy still owns his place and he has the same deal you were going to give him but for less money.

My opinion on a fair deal is that paying him any less than full market value is unfair. My Grandpa told me a long time ago to never try and buy something that someone didn't want to sell. You are the one that wants to buy and for that you will probably have to pay a premium.

 

[Anonymous Poster]

Grimreaper,

Another interesting alternative!

I am not sure if my neighbor would be interested in doing something like that...kind of complicated, you know!

But I will add it to my list of options if/when I get to talk to him about this. I keep thinking if I were in his position [as I perceive it] that some kind of deal that puts money in his hand would be desirable to him, as long as his life would change in no other way.

Thank you for another alternative!

Bill in pgh, pa

 

[Anonymous Poster]

<font color=blue> I think what's really being missed here is does the guy even want to sell the land? </font color=blue>

You are right, naturally.

But I figured it would be better to have an idea of what a fair offer would be before talking to my neighbor of 25 years about it.

Maybe it could be something helpful to him, or maybe of no interest at all.

Nothing would be worse than not knowing what might be fair, and wanting to be fair, having something that could be of benifit to both parties not work out due to my own ignorance!

Thanks for your comments...I see things a lot like you state them...I think my neighbor could use some money, but I don't know...can't know...you know what I mean.

The best thing I can do is guess, and when I guess I wrong more often than right!

<font color=blue>My opinion on a fair deal is that paying him any less than full market value is unfair.</font color=blue>

That is why the idea proposed above, pay full value and lease back for the taxes, may be the way to approach this. It "feels right" even though a different alternative might actually put more money in my neighbor's pocket in the long run...

Bill

 

[Egon]

I haven't read all the posts.

Sorta sounds like you are offering something like a "Reverse Mortgage " thing. This could lead to future legal problems.

Buy the land outright as a very wise man suggested and then lease it back to him [he's got money now ] under conditions that are agreeable to both parties.

Egon