Hi everyone. I hope someone can help me with this query.
We are building a house with my brother and sister-in-law for the purpose of build and sell, however they have now decided they really like the property and want to live in it.
The house is obviously not complete yet so how do we work out a price that would be a win-win for both parties at this stage of development?
For further information – we bought the land at $130,000. The same size land is now selling for approx $220,000.
The contract price of the house is $190,000 (incuding ducted air-con). The house is 295 sqm (incl double lock up garage). The house includes 4bed, 2 bath, study, activity room, games room, theatre room etc etc….
I hope someone can help us come to a fair and reasonable price that will suit all of us.
Thanks in advance.Get a valuer to value the property at this stage of development and they pay out your half of the valuation figure..
Or go halves in the current land value and they cover the house cost in full.
Unfortuantley it doens’t sound like a contract was written up prior to starting covering this type of thing. Perhpas next time do, as this could cause ill feeling if not handled well.
Good Luck
PKIf we went halves on the land value and they pay out the contract price of the house then we would only make money from the increase in value of the land? Is this correct? If so, then it would definitely be in our better interests to ride out the next 6 months until the property is completed and then sell so that we benefit from the increase in house price as well.
Or can we benefit from the increase in house price now – since it’s been about 4 months since we signed up and the house has definitely increased in value since then.
Am I understanding this correctly?
Is someone able to give me a ball park figure that we should be looking at?
Thanks alotGee, this one could end in tears.
Presumably you went into this with the intention of making a profit?
It’s going to be tough to work out an equitable split with the house half built. I would finish it, get a couple of valuations, and give your brother the option to buy you out.
What will be the CGT implications if you ‘sell’ your half of the property upon completion?
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http://www.depreciator.com.auThis can get very tricky.
The only fair value for the property is what the market will pay.
Licensed valuers are usually conservative in their assessment to what the “true” price is to avoid malpractice suits. So I wouldn’t recommend that as a solution.
You could put it to a public auction and have your relatives bid against the open market. That would be fair but would have costs attached to it such as auctioneers fees and maybe even agent’s commissions.
A lateral solution is that you turn the property into a rental property where your relative pays you 50% of market value rental. Use the local real estate agents to all give you an appraisal and then choose the maximum or the average as a figure. If you need your capital back, refinance to get it out. Then when your relatives eventually want to move you sell into the open market and the proceeds split 50/50 less any financing drawings.
Otherwise I would recommend that you maintain the original strategy and purpose which was to sell the finished product. Like the auction, they can trump the highest offer if they want to buy it. Agents commissions will likely still apply unless you find an agent that will sign the agency agreement to exclude sales found by the vendor.
Post back what you all eventually decide.
Hi Bonnie. Just a thought. I imagine you both must have had a fair idea what the finished product was going to sell for. Perhaps you could simply sell them your half for half that price less a 5 or 10 percent discount. Alternatively, 1/2 the price of the land value (not the purchase price, as it was for both of you to make money), and then an au gratis payment to you of a percentage up to half of what the profit would have been hoped for. In all fairness, anything less than that you are getting the shaft I would say. As the other replies indicated, if this was not suitable you could proceed as planned, and then sell them your half at market price,agian less a discount as you are ot worrying about finding sellers or listing with agents, so it is a quick and easy deal in this case…….or it may be worth suggesting they forget about it due to the difficulty of being fair allround and then they can duplicate their own house afterwards with their share of the profits. Hope it all works for you both. And make sure whatever you agree on now, put it in writing and get it witnessed. It is not untrusting of you, but is the best way for you to keep things amicable and avoid any misunderstandings….[specool]
Hi Guys,
Thank you so much to everyone who took the time to offer some really great suggestions.
After much discussion between my brother and sister-in-law and my husband and I we have all decided that it is too tricky to come up with a figure for them to buy us out so we have agreed to continue with plan A – to finish and sell the property together.
That way both parties are gaining greatly from the venture and it is a fair deal all round.
You’re all right – it really wasn’t worth the tears for them to buy us out, and the last thing we needed was a family fall out – especially since we’re so close and we all get along really well.
Thanks again to everyone for the advice and you really helped us realise that the best thing is for us all to see this venture through to the end together.Very sensible!
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