Ask Cornerstone: I have an opportunity to buy three rental properties from my siblings but I’m unsure of the price I should pay.
I have an opportunity to buy three rental properties from my siblings but I'm unsure of the price I should pay. I want to be fair, but don't want to overpay. We had one of the properties on the market for 6 months earlier this year – listed at $79k, dropped to $60k over a couple of months and still not a single bit of interest. We had listed with realtor, not FSBO. Should I credit some of the cost that we would have had to pay a realtor commissions if it was on the market?
What is a good purchase price for me and still fair to my siblings as this is not a “make a killing” deal?
If the broker didn't provide realistic comps, then he or she isn’t doing a good job and you should find a new broker/realtor. You know that $60K is not market price because it didn’t sell.
To become a little knowledgeable on the market price yourself, in the simplest terms, you have to find at least three comparable properties (in size, bed/baths/ and repair state) in the same (or comparable neighboring) area that sold in the last 3 or 4 months (no more than six months). Try Zillow and filter for recent sales (and sign up for an account so you can receive notices of new sales). Zillow has an article here that goes into a little more detail about it: http://www.zillow.com/wikipages/Picking-the-Best-Comparables/
Go to the most active broker in the area and ask them this question, “If you want to sell a property in one week, what would be the best price to list it at?” Ask this of three different brokers. The average price should be the price you could use with your siblings. You would expect that “one week” price to be slightly below market so don’t deduct any commission cost.
If your siblings don't like your offer, then it would be probably best to keep the houses on the market but find a better broker to list with. Making deals with family members can be tricky territory to maintain family relationships without creating resentment.