Is this resale clause normal when buying from family estate?

williamsemFebruary 2, 2013

Long story, but here's the Readers Digest version.

Grandma passed away suddenly in July. Mom and Aunt are her only children and co-executors of the estate. Estate will be split 6 even ways between the two of them and the 4 grandchildren.

They need to sell her house, owned free and clear. Mom wants to buy it as it meets her needs better than her current home. Aunt instsitng on a clause where if Mom sells it within the next 7 years any amount over her purchase price will be split among the other 5 of us. She believes this is fair as the price they are agreeing on, in her opinion, is below market value.

Problem is she is misguided in her belief on how much the house is worth. Her figure would be optimistic even if the house was perfect. But there is a vertical crack with lateral shift in the foundation wall where the front porch meets the house, and the roof is one long slope over that whole side. There is a mold issue in one corner of the basement (thank you, Irene and Sandy). The bedroom-turned-bathroom was never trimmed, and the floor is in disrepair. Plus it needs the general paint, etc most homes going on the market need.

The agreed upon price is actually what I think market value is at the moment, but would probably need a concession for the foundation and mold. So it is not "below market". Mom has no intention on "flipping" the house, nor does she have any means to do so.

Is this type of resale clause common for estate sales within the family? I tend to think Aunt is crazy. Mom is arranging for a bank appraisal, not sure how much that will help. Aunt claims she has a buyer willing to pay her unrealistic value, but if it appraises much, much lower I don't see how any buyer would be able to obtain a mortgage.

Any suggestions/thoughts? I have zero real estate expertise.

Thank you for reporting this comment. Undo

So if your mother spends $60,000 on the home in the next seven years and sells it, your aunt wants $10,000 to come out of your mother's pocket into hers? That makes zero sense. In seven years, the real estate market may be higher, lower, or about the same as it is now; maybe the house's price would double in five years even if your mother didn't do anything to it. Your aunt is "entitled" (hate that word!) to 1/6th of the home's present value, but she isn't entitled to 1/6th of the *rise* in value: your mother is one who accepted the risk and paid taxes/utilities/upkeep. If your aunt insists the house is worth more than its appraisal or market value, have your mother prepare a formal offer contingent on the foundation and mold issues being remedied before closing; 1/6th of that cost will have to be paid by your aunt *before* she receives her share of the house's value. :)

More realistically, I suspect this isn't about the money itself; it's more likely about the relationship between two sisters and the relationship between each of them and their mother. It's quite possible that your aunt may not want your mother to live in their mother's house. Tread carefully if you think that might be behind her concerns/demands/irrationality: the family wounds that play out when addressing a parent's estate is often unconscious (your aunt may think it's really about the money).

In addition to the appraisal, it might be worth paying for an inspection. You can solicit bids for the foundation and mold repair to have concrete figures to discuss, and if she's still at odds, you could probably pay a local realtor to generate some comps so you could compare apples to apples. And tell your aunt that you need to see a formal offer from her buyer because you can't discuss hypotheticals. There might be someone in the world willing to pay $1M for my house, but I can't use that as leverage to motivate another buyer to offer $200,000 instead of $190,000!

    Bookmark   February 2, 2013 at 10:32PM
Thank you for reporting this comment. Undo

I'd suggest that Aunt sell it to her (probably cash) buyer for full price, and Mom take the unrealistic 1/6th cut to upgrade to a better home for herself that doesn't come with a lot of the issues.

That, of course, doesn't take into consideration the nostalgia, if any, of this home. But, it would be the economical choice.

    Bookmark   February 3, 2013 at 1:05AM
Thank you for reporting this comment. Undo

Just sell it on the open market. Unfortunately in my experience when a situation start like this with mistrust in all directions, it is better just to list it and sell on the open market. True, everybody useally this a gets a little less way after you factor in selling costs etc, but no one can argue that one family member took advantage of the other. Fortunately there many more families that are able to handle estate divisions very amicably, but it takes communication and trust. I hate the situations were every family member things that their kin are out to screw them. It is usually a lack of communication or enough sophistication to understand the whole picture, but once a family member gets his back-up afraid to be screwed, it is usually a self-fulfilling prophecy or that person ends up standing in the way of a good resolution and it's always more expensive and devisive. Best of luck. You might wait until the appraisal comes back before making any accusation and then based on that make anproposal that is fair to all.

    Bookmark   February 3, 2013 at 2:45AM
Thank you for reporting this comment. Undo

Exactly the same type clause my sisters and I had in a similar transaction.

    Bookmark   February 3, 2013 at 6:17AM
Thank you for reporting this comment. Undo

In my opinion, no, it is not a normal clause to have in a real estate transaction.

But I can come up with a couple suggestions for how to deal with this.

Have an independent appraisal done that all 6 people involved agree to accept.

Or let Aunt try to sell the house for the amount she believes it is worth, with a 6 month cut off date after which your mother buys it free and clear.

Or if your Mother really wants the house, go along with the Aunt's plan but amend it to reduce the shared profits by the amount of money your Mother puts into the house for repairs.

Make sure everyone realizes and agrees to pay their share of the cost to hire a lawyer to develop and record an agreement. The lawyer will want to include variables that could arise, such as what happens if your Mother dies or needs to go into assisted living during that time.

I was involved in a family sale of a house to an inheritant. Decades later there are people griping about it. I would let your Aunt try to sell it on the open market.

    Bookmark   February 3, 2013 at 10:36AM
Thank you for reporting this comment. Undo

Yes, artichokey, that is what she expects. The crazy thing is it's not the house they grew up in. It's not even the house she lived in when I was growing up. It's one she purchased about 15 years ago, long after my grandfather passed away, and shortly after that she started spending most of her time in FL.

If we could sell it of what she thinks it'd worth, that would be different. But we're talking 140k vs I think I will appraise at 90k +/- depending on how the foundation and mold are factored in. I doubt her buyers will pay that much above appraisal, and I know they are not aware of the problems yet (Aunt even hid them from her real estate agent friend that looked at the house).

Out of the 6 of us, she's the only one being a jerk about things. It's. small estate, pretty much just the house and car. No savings, no retirement plan, etc. And interestingly enough she's the only one lying about stuff and taking things without anyone else knowing.

I wish Mom would reconsider, but she really likes the house. Hopefully the formal appraisal will help. I think the suggestion for a formal offer from the other buyer is a good idea, thanks for that suggestion. If it requires the house to appraise at a certain value then it could be a moot point if the appraisal comes in where I think it will.

    Bookmark   February 3, 2013 at 10:57AM
Thank you for reporting this comment. Undo

Jmc01, if you wouldn't mind sharing a little, why did you have such a clause in your transaction? I'm just having a hard time understanding the purpose of this type of clause.

My biggest concern is what happens if Mom or her partner have a health issue (neither is exactly in great health) and need to move for greater assistance. Or have to relocate to find a job if laid off.

They have no interest in flipping the house, and have no financial resources to do so even if they wanted to. All Moms inheritance would be used to purchase the house (she would get no cash out of the deal, just equity).

    Bookmark   February 3, 2013 at 11:03AM
Thank you for reporting this comment. Undo

Any 'gain' should at least be reduced by the cost of repairs and inflation over the years of ownership.

Someone is being very greedy.

    Bookmark   February 3, 2013 at 11:33AM
Thank you for reporting this comment. Undo

If your mom sells the home at a loss will the heirs "share" in that too? I think your mom should look elsewhere for a home, this plan of action is going to cause long term friction within your family.

    Bookmark   February 3, 2013 at 11:51AM
Thank you for reporting this comment. Undo
Sophie Wheeler

"They have no interest in flipping the house, and have no financial resources to do so even if they wanted to. All Moms inheritance would be used to purchase the house"

So, if your mom is going to inherit 1/6th of the value of the house or 1/6 of the home, how does that translate into having the money to buy the other 5/6ths of the house and fix it's problems too? If she doesn't have the money to fix it up for a "flip", then how does she plan to address the issues requiring money NOW? And how does she plan to pay the other heirs?

Something isn't right with the math here.

    Bookmark   February 3, 2013 at 12:52PM
Thank you for reporting this comment. Undo

We had that clause because it would prevent one from pocketing a larger share of the estate than the one was intended to get.

All 3 inherited a house. One wanted to buy out both of the equal 1/3 shares that each of the 2 sisters owned. An appraisal was going to be obtained. However, and this is the big reason, this was occuring in a rising market....similar to now but rising more rapidly and more quickly.. The 2 sisters didn't want to agree to their sale and then learn that 6, 12 months later the owner sister sold the place and pocketed additional profit, profit that the deceased originally intended all 3 to share equally. This clause just put in writing that the deceased's intentions would be followed.

    Bookmark   February 3, 2013 at 1:15PM
Thank you for reporting this comment. Undo

She plans on using her portion as the down payment (not sure about the details here), and taking out a mortgage to cover the remaining 5/6 plus closing costs.

The foundation really needs to be inspected. It should very likely be a price concession, depending on inspection results and how far in denial Aunt is. Personally I think the foundation and mold should be fixed by the estate regardless if purchaser as these could make any sale difficult.

The rest of the stuff is not structural. They could live there and fix as they could afford to. But to flip the house, which my understanding is the quicker the better due to ongoing costs that must be paid, someone would need to put in probably 8-10k (more if paying for labor) to make it ready to move in. The bathroom at a minimum needs the floor refinished (wood floor, was a bedroom initiall), new sink/vanity, trim, and a vent. Former bath, now laundry, needs new flooring and some TLC. Whole house needs a good cleaning and new paint to get rid of the cigarette smell. Porch needs new flooring or carpet. For resale, porch blinds should be replaced and the kitchen floor should be replaced, and the cabinets would be much improved with some paint or gel stain as they are pretty sad looking. That's what I think it would take to make any money on a flip if the house. It would take Mom probably 5 years to do all that, which would then make selling it much less profitable since she paid taxes and utilizes that whole time. Her intention is not to sell.

    Bookmark   February 3, 2013 at 1:27PM
Thank you for reporting this comment. Undo
Sophie Wheeler

If mom doesn't have the 120K cash in order to buy the house outright from the heirs and then fix it, then is it realistic to think that this could even happen?

There will be much less bad blood if the home is sold in order to fulfill the estate split. Anything else will involve more cash involvement than it seems that your mother will have available to spend.

1/6 of a 100K house isn't the 20% down that a bank would want to see in order to finance the purchase. Then there is the costs of the repairs that would need to be made in order to have a bank finance it. Say 20K. Where is that money to come from? Which heir is going to float that cost? At a minimum, your mom would need the cash to do the repairs in order to increase her share of the equity to 20% or greater, and then the rest of the heirs would need to agree to the sale. And then you'd have to find a bank sympathetic to the situation that would finance it. Would your mom have enough income to qualify for the mortgage payments? Or would she have to sell her home first in order to be able to afford to buy this home?

Sell the house, pocket the money, and she'll be no better or worse off when it comes to house hunting than she would be if it weren't a family home. In fact, without the emotional infighting, she's likely to be much more objective about being able to buy a new home.

    Bookmark   February 3, 2013 at 2:21PM
Thank you for reporting this comment. Undo

Speaking from experience with family everything you can to deter your mother from purchasing this. It will be much less complicated in the long run to sell it outright and divide the finances equally. You're already encountering friction with your aunt now. It's not going to get better and will cause friction and heartache for years to come. Especially with the repairs needed. You've already said your mother doesn't have the financial wherewithall to sustain this. Someone is always going to feel that they were cheated in some way and your mother will be the one blamed. She doesn't need the heartache.

    Bookmark   February 3, 2013 at 9:41PM
Thank you for reporting this comment. Undo

I'm having a hard time understanding why your Mom considers this house better than her current one, given the foundation and mold issues. Does she live in a dump right now? I don't mean any disrespect with my question, it may be that this is a step up for her. It just doesn't sound very attractive.

But I agree with the others that given the friction with Aunt, plus the fact that this house needs work, she should stay where she's at (if it's livable) or find something else that doesn't need fixing up (if it's not).

    Bookmark   February 3, 2013 at 10:27PM
Thank you for reporting this comment. Undo

I'm glad it's not just me thinking this clause is odd. And as much as I want my mom to be happy, I agree with the overwhelming vote here of not buying the house. The behavior I've seen from my Aunt during ths whole thing has been disappointing and appalling, not just about the house, and it's not just my own bias as my great aunt has unfortunately witnessed this behavior too.

Weedyacres, I appreciate your tactful concern about mom's current arrangements. She's fine where she is, in a similar size home in a neighboring town. She likes this house so much because it has a newer hvac and hot water heater and she is familiar with its repair history as she previously lived in the home while my grandmother was in FL (basement appartment, since destroyed in the flood). It also has central air, where her present home does not and a first floor laundry vs hers in the basement and her knees are not good. To make her current home current with those features will cost just about as much as what she stands to inherit.

I guess I'll wait to see how the appraisal goes. I'd much rather mom decide on her own it won't work out well. I will also see if I can convince her to ask for a formal offer from the other interested party.

    Bookmark   February 3, 2013 at 10:48PM
Thank you for reporting this comment. Undo

williamsem, you don't need to disclose your mother's financial situation to us. Several people have raised legitimate concerns about whether your mother has the financial ability to afford the house and it's worth having a frank discussion with your mother about whether she can afford this as well as the associated costs/complications (Does she need to sell another house? Moving is expensive. Foundation and mold remediation should be done before moving in, etc.).

In terms of family peace, it might be easier to sell the house on the open market; if it could *really* be sold for 140K, your mother might probably be better off taking her share, but it sounds like there might be difficulty getting your aunt to agree on a realistic price. Who is the executor of the estate? Depending on the terms of the will, the executor might have to use his/her power to sell the house, because I doubt the six of you are going to agree on something.

If your aunt is taking stuff, again, the executor needs to be involved.

Just curiously - and you obviously don't have to answer this - you mentioned there are four grandchildren. How many are your aunt's children and how many are your mother's?

ETA: Oops, looks like you posted while I was typing!

This post was edited by Artichokey on Sun, Feb 3, 13 at 22:54

    Bookmark   February 3, 2013 at 10:52PM
Thank you for reporting this comment. Undo

Artichokey - he said that the Aunt and the Mom are co-executors which doesn't help the situation.

If it was me - I would sell the house on the open market. Both co-executors meet with a real estate agent so Mom can make sure proper disclosures are made. Sell it - if Aunt insists on unrealistic selling price then list it and let her see it won't sell for that.

    Bookmark   February 3, 2013 at 11:17PM
Thank you for reporting this comment. Undo

They each have two kids. My sister will go along with anything as long as it seems fair and we all agree. She has trouble making decisions, so the less she has to think about the better (we have already had our chance to pick personal effects). One cousin is really self absorbed and selfish, but has only been a minor problem and I don't think has a strong opinion on the house (other than more money is better, nobody on that side is very responsible in that regard). Other, older cousin is out of state and largely uninvolved, but if presented with hard data will easily go with whatever makes most sense as she's logical and mature enough to have her own opinions. I'm the oldest. I really don't care who buys the house as long as its a fair transaction. I'd rather have the peace of mind of knowing all disclosures were made and problems fixed appropriately for a clean transaction than have a couple thousand dollars more, which I know is at odds with Aunt.

We tried reasoning with Aunt about access to the house, but "it's not fair" that Mom would be able to come and go but not her (she projects her theft onto others). None of the 3 of us have removed a single item that wasn't agreed on by all, other than trash (we did toss all the used toiletries, medical supplies, etc from the bathroom as it was a large volume). Though she has removed items, even before we all had a chance to pick mementos, for friends, relatives of friends, etc.

And that's just the problems directly related to the estate. Regardless of how this sale goes, the behavior through this whole process has been grossly inappropriate and disappointing. It's not this sale that's souring relationships. The sale is just the most recent thing. It's a shame, really, considering how small this section of our family is.

    Bookmark   February 4, 2013 at 12:24AM
Thank you for reporting this comment. Undo

I was in a similar situation with my sister. I "sold" my 50% share of an inherited lot to her for a good price. I didn't insist on a resale clause because:

1. This was an inheritance. I didn't "earn" it with my own work, it was given to me for free so I don't really think I am invested through personal achievements.
2. She's my sister and if she wants to turn around and get some profit off this deal then good for her. I didn't care.
3. Once I agree to a sale and follow through, it's not mine anymore. I don't think a former owner should have a controlling interest (which a re-sale clause is in a certain way) after the sale. If I would have been concerned with profiting off the discounted price, I would not have agreed to the price to begin with.

    Bookmark   February 4, 2013 at 9:28AM
Thank you for reporting this comment. Undo

I never have had this come up in my real estate life or in my real life, so I've been reading & learning & thinking, & the thing that I keep returning to is:

Why would any buyer agree to a purchase with less fair or favorable terms than the seller could get from any other buyer?

    Bookmark   February 4, 2013 at 11:02AM
Thank you for reporting this comment. Undo

Make sure your mom takes into consideration that if she moves, she'll have to pay the transaction costs of selling her current home. Are those costs plus the costs of remediating the foundation and mold issues really less than adding central air and buying a new furnace and water heater?

Not to mention the (sad) family dynamics that are being exhibited here.

    Bookmark   February 4, 2013 at 12:10PM
Thank you for reporting this comment. Undo

Thought I'd pop over from Kitchens for an update. Thanks so much to everyone for the input and information.

I first gently tried to convince Mom not to buy the house. I suggested that Mom have an appraisal, which she wanted but had trouble arranging. Also suggested if she still wanted to buy the house that she not buy the house at the moment, but suggest to Aunt that they agree to list the house at Aunt's price and if it doesn't sell for an agreed on minimum after an agreed on amount of time, Mom could buy the house with no conditions. That way she either could get the house, or would get a larger inheritance than if she purchased the house at the lower price.

Mom ended up getting an inspection, which I have not seen, about 2 weeks ago. Last week she decided it wasn't the right time to be buying a house and told Aunt she was no longer interested. Best part is she is much less on edge about things now, she felt much better after making that decision.

Aunt wanted to meet with the "buyer" she had, but cancelled last minute. They are supposed to meet this week now.

I'm so glad Mom opted out of this. She would have ended up living on the same block as Aunt after all this. I don't think she would have been happy.

But now they need to get the house ready for market. Aunt is dragging her feet, yet won't let Mom clear things out even though we have all had a chance to take anything we wanted. One battle down, but the dysfunction continues. I feel bad that Mom has to deal with this, but not much I can do to change that.

I'll try to post back when the house sells, for those interested in how this plays out.

    Bookmark   March 11, 2013 at 1:07AM
Thank you for reporting this comment. Undo

The more I think about this type of clause the more it strikes me as simply not enforceable.

The sales contract does not normally survive the granting of a deed to the new owner, and unless you put a condition like this in the deed (thus arguably not making it 'clear title' since there is now a condition on the transferring the title) it would have no affect since the sales contract is NOT part of the chain of title.

    Bookmark   March 11, 2013 at 11:42AM
Thank you for reporting this comment. Undo

Well, even assuming that was true, the trouble it would cause contesting it after the fact is just not worth it. I know people cope with losing parents in different ways, but it's just sad to see this side of my Aunt. And I feel bad my great-aunt, who lost her only sister, has had to witness some of this going on first hand.

    Bookmark   March 11, 2013 at 9:48PM
Thank you for reporting this comment. Undo

Thanks for the update. I look forward to hearing how this ends.

    Bookmark   March 12, 2013 at 9:28AM
Thank you for reporting this comment. Undo


Well, buyer came through pre qualified for Aunt's price, but has no down payment. They are now off to the bank to see what their options are. Thats the good news! Crossing my fingers it appraises...and my toes too, need a lot of luck on that one!


They want to rent it to the prospective buyers while getting things in order to sell to to them. * facepalm*

I wish I had gone tonight, but we thought Aunt would feel insulted. Tried to listen via phone, but the reception was too bad. Had I known, I would have at least been able to text Mom to hedge her bet until we could talk.

So now I promised her I'd copy/paste some stories from GW for her to read. I hesitate to just send her here with this thread hanging out.

So if you have a favorite renting to buyer horror story, please feel free to share or link to it!

    Bookmark   March 12, 2013 at 10:39PM
Thank you for reporting this comment. Undo

I'll continue to update for the benefit of future searchers looking for advice.

House appraised lower than Aunt thought (no surprise there). There was some sort of falling out with the buyers, now renting the house. They still can't close until they can cover closing costs, and now they have had a significant change in income. And they're not happy the house is going on the market.

Oh, did I mention they were allowed to paint, carpet, etc before even renting! Yeah, I didn't have a say in that. Or any of this.

So to sum up for anyone still following: inherited house to be sold to "good friends" that made an offer and were in the process of getting paperwork through. Without input from anyone else involved, buyers allowed to rent house. Before lease in effect, buyers allowed to paint, carpet, etc. house didnt appraise, so need new offer. Now situation has changed for them financially. Things are not good between buyer and Aunt (us). Plus they are upset about money they put into house already.

How many out there think this will end well?....anyone? I just hope things don't end up with an eviction process and a trashed house.

An the plus side, thanks in part to GW, when the work started before the lease, once Mom found out she was able to put her foot down and insist on paperwork about what happens if they don't buy, and insist all work stop until an insurance policy was in place. Plus a formal rent agreement and consult with their attorney. So thanks GW!

    Bookmark   May 25, 2013 at 11:53AM
Thank you for reporting this comment. Undo

What did all those paperworks and consults with the attorney result in? That should inform the direction going forward for this house.

    Bookmark   May 25, 2013 at 12:46PM
Thank you for reporting this comment. Undo

What a mess, sorry for you.

    Bookmark   May 25, 2013 at 12:51PM
Thank you for reporting this comment. Undo

Crazy. Is the lease even legal since one of the co-executors didn't sign it?

    Bookmark   May 25, 2013 at 5:16PM
Thank you for reporting this comment. Undo

Well, Aunt had verbally agreed to rent and by the time Mom found out things were pretty committed. They both signed. But after Mom insisted on consulting the lawyer and getting insurance if needed. She also found out after they were allowed to start painting, etc without her knowledge. She was also under the impression that once appraised, the sale was going forward, so it wasn't worth trying to argue as Aunt was being unreasonable and acting without thinking.

Now that things have changed, lawyer advised them to sell. Lease is now month to month, which ticked off ex-buyers. I showed up to help clear out the last bit in the garage and walked into a shouting match with ex-buyers. I took a walk until they stopped.

If this wasn't affecting five other people I'd have no problem letting Aunt deal with the mess she made. But with everyone else involved, it makes me mad, especially because my sister and I were adamantly against renting after watching Dad go through the exact same thing a few years ago.

    Bookmark   May 25, 2013 at 11:02PM
Thank you for reporting this comment. Undo

I think some folks have rather thin blood.

They are showing that money is thicker.

    Bookmark   May 26, 2013 at 4:07PM
Sign Up to comment
More Discussions
Questions for buying a home with a septic system
I just came across an interesting article about issues...
Will realtor give me the photos of my house for memories?
We are putting our house on the market in order to...
Do buyers prefer table & chairs or island in kitchen?
We are getting our house in order before listing it...
Did you change the locks out when moving into new home?
Did you change the locks on the exterior doors or have...
Exclusive listing?
We are moving out of state in July, therefore need...
© 2015 Houzz Inc. Houzz® The new way to design your home™