Expert: Matt Heisler - 9/9/2007

Question
Hi,
We own a vacation home in Newport RI and were originally planning on selling it by putting it on the market.  However, my sister has expressed interest in keeping it "in the family" and is willing to own it jointly between our families.  This is great news..but I don't know how to price it fairly...without getting too specific, is there a general rule of thumb regarding this type of sale?  We paid $472K back in 2004.  Any thoughts and opinions you could provide would be much appreciated...Thanks!

Answer
Hello Maura:

There are many ways to solve this problem.  I think coming up with a fair price on the house is the easiest issue.
1) An appraiser or multiple appraisers.  
Appraisers are licensed and objective. I would pick two (you pick one, and your sister picks one) and average their estimates out.  Cost:  About $700.
2) Have 3 real estate agents do a Price opinion.  They will be thinking you want to sell, so really you may want to pay them (since you're not).  Agents prices can vary more than appraisers, so you'll need more. Cost: zero to $450

The toughest part will be working out the expenses of everything else - and how all future expenses will be handled.  As the original owner, I would probably work it out so that we were a 51% owner - this eliminates voting up front.  When future contracting work needs to be done you'll have control.  If they want to drive the bus, have them have  51% control (and paying for 2% down the line to switch off isn't a big deal).  

Remember, I'm sure it's a nice house, but it's not worth fighting over.  So make sure that as many future expenses are discussed, written out, and agreed upon first.  THEN sell your share of the house.

Personally, if you like the house, I would find a way to keep it.  You are unlikely to make much money after only 3 years, since we've been down in 2 of them.