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

[TedLynn]

I realize that in other parts of this great nation things are done diffrently sometimes. Around this neck of the woods, your best approach might be to approach your neighbor during a friendly conversation with "if you ever feel the need, or decide to sell your property, I would sure appreciate the opportunity to buy it." He might tell you right up front that he intends to die on it. On the other hand, it might open the door to negotiations. BTW, I believe you said he was 60. I don't consider that too old!!!. BTW also, the life estate value is subtracted from the market value to determine the cash transfer. The warrantee deed transfers immediately and since you would become the owner, the taxes are yours. I can't imagine paying out good money and depending on someone else to pay the taxes and avoid the tax assessor selling the property for lack of payment, or filing a lien. Good luck. Ted DK 45

 

[Anonymous Poster]

I am slowly becoming educated here...

What I plan on doing is asking my neighbor if he would be interested in getting a nice lump of cash in his hand while still living on the property and using it just like he does now for the rest of his life.

If he is interested, we can then worry about working out the details. I know things like life estates can provide him with the security I would want if I were him. Nothing ventured, nothing gained. It's not like we are strangers...been friendly neighbors for going on 25 years.

I also do not think 60 is old. I will be there too in a few blinks of the eyes! Our motivation is to keep things as they are for the rest of our years here...

I will have to dig a little more to understand what a warantee deed is, as compared to a life estate where a person keeps control of his property until he dies, at which time the deed transfers to the "remainder" party...

If my neighbor had kids or close relatives I would not even be thinking about such a thing. Just know he was an only child, and got the place from his parents and was never married...maybe we can help each other in a win/win arrangement.

Thanks for the continuing advice!

Bill in PGh, PA

 

[bgott]

http://www.reverse.org/

Try this.

 

[Anonymous Poster]

Macher:
1. The purchase option is actually simpler (but not necessarily the best-was just offering how I would do it).
2. "My opinion on a fair deal is that paying him any less than full market value is unfair." Groan. There IS NO SUCH THING as a "fair price". It is a word symbol that is empty of content-points to nothing. It is used only when someone wants someone else to do a deal at a higher price (or lower depending on your perspective). There are only historical prices. Period. And those are not necessarily "fair". This is a tractor forum. Ok, how "fair" was Mr. Ford in the 1920s undercutting competitor prices through his mass production techniques? He drove dozens of companies out of business throwing tens of thousands out of work. His "unfair" pricing drove International Harvestor to the wall and forced them to create the Farmall (a better design than the Fordson tractor). Ford's "unfair", "preditory" pricing sped the mechanization of farming and drove down food costs. The use of "fair" is really a substitute for saying: "I want this person to do a deal on terms I think are 'proper' and 'reasonable' FOR ME, and, if they do, it will be a 'fair' price." FAIR is what makes YOU feel good, which may, or may not, be what makes the other person "feel" good too.
3. There is a concept in economics first articulated in the late 1800s (by a fellow by the name of Eugen von Bohm-Bawerk in Capital and Interest) known as marginal utility as the basis for "pricing" and "value" issues. It corrected an error by Adam Smith (in The Wealth of Nations) regarding the question of market pricing.
Remember, fairness is what makes you feel good, it is not intrinsic. John

 

[Anonymous Poster]

Grimreaper,

Economic theory is one thing...but life does not always follow the theory when we deal with people close to us in some way.

A good example is dealing with our kids or perhaps our siblings. If we sell something we may actually try to be fair. Won't hide the fact that there are shortcomings or negatives that should be considered, for example.

I agree with you on the economic theory side. But don't agree that it is not possible to make a fair deal with a friend/neighbor. I am not sure that is what you were saying anyway.

If two people are satisfied with a deal, that does not make the deal fair. An example might be these old ladies in Florida that go to dance schools and are conned into giving tens of thousands of dollars to their instructors. This really happens and the ladies are satisfied with the arrangement [read about this in the papers there on our first visit to Florida last January]. In reality, although happy, these elderly women have been taken advantage of big time.

In the open market, we try to get the most for the least. Our tractor shopping sprees are an example.

Back to this thread, if I paid full value for the neighbor's property, and he had the right to use it for the rest of his life, but paid the taxes and maintained it, then perhaps this could be a "fair" deal, IF the property appreciated at the same rate as the money I have him would have if I had invested it. If that were the case, then in the end I would have the same value as I would have had I just kept the money in the first place. AND he would have the same value in money as if he had kept the property in the first place. I know this example is simplistic...but it kind of makes the point.

Now if I paid the taxes, it would seem only fair that the cash put in the neighbor's hand should be quite a bit less than the actual market value. How much less? Time to get out those life espectancy tables I suppose...but then the gamble starts...as they work fine for groups of people, but not for a one person deal.

If I were willing to take the risk that property-value growth would equal investment growth, then a deal where the property owner paid the taxes for the rest of his life would be to my advantage I think. Simply because it takes a way a variable. I suppose there are ways to make sure that happens. I mean that he pays taxes every year or else...I believe he would though, without question, but you never know...

The ONLY reason I would consider doing such a thing is that we value the guarantee we would get by doing it, that is, there would be no condo or big house sitting a hundred feet from ours on the side we look out all the time.

I certainly would not consider doing this for property somewhere else...buying property, and then letting someone else use it for the cost of taxes and maintenance only, does not sound like a good business deal to me! But I guess it could be in some cases...

Like you said...or didn't say /w3tcompact/icons/blush.gif...everything is relative /w3tcompact/icons/smile.gif

Bill

 

[Woodbeef]

I think you've finally hit on to why you should pay full price for this property. You want to be sure no one else gets it!! For this reassurance it will cost you. So you had be be sure that the neighbor does not think your are trying to scalp him on the deal. If he gets that impression look out,you will be the last on his list of purchasers,whether he needs the $$$ or not.

Better watch it though you are starting to sound like the city slickers that move out here,and then ***** about a house going up next to them or across the road from them. If you do not want them there,then buy that property before they do!!

 

[MossRoad]

<font color=blue>If you do not want them there,then buy that property before they do!! </font color=blue>

Well said.

 

[Anonymous Poster]

<font color=blue>Better watch it though you are starting to sound like the city slickers that move out here...</font color=blue>

/w3tcompact/icons/laugh.gif/w3tcompact/icons/laugh.gif/w3tcompact/icons/laugh.gif

We're not very far from the city center here...guess we all sound like city slickers when we talk.../w3tcompact/icons/grin.gif

I certainly agree that it really hurts when you intend one thing, but another takes it a different way...price we pay for being married I guess.../w3tcompact/icons/smile.gif...great shame if that same thing happened when I talk with my neighbor!

<font color=blue>...and than ***** about a house going up next to them or across the road from them. If you do not want them there,then buy that property before they do!! </font color=blue>

That's exactly what I am trying to do...but the problem is it's not for sale! At least not yet...we'll see what happens. Best I can do is offer a fair deal, something he likely would not get from anyone else, and see if he is interested.

Grateful for all the input!

Bill near Pgh, PA

 

[Anonymous Poster]

bgott,

Lot of good info at www.reverse.org.

I have started reading it...grateful for your pointing me at this site...will take more than a few minutes to get through all that is there for sure!

Bill in Pgh, PA

 

[Alan L.]

You should not expect to pay the full value of the property, because you will be giving him a life estate. Because you can't do with it what you please until he is gone, it cannot be worth full value.

Once the value of the property is determined, and using his age, the value of this life estate should be determinable, and such amount would be subtracted from the total value. You are buying the property, less the life estate.