Q: I own a vacation home with my sister we inherited years ago. Recently she approached me about buying out my half of the house. We get along well, and I rarely use the property, while she practically lives there, so this seems fair. But I do not want to cause any problems because of the transfer. How can we protect against this turning out bad? — Raoul
A: I have seen many solid relationships turn bad once money became involved. This is often caused by each party understanding the deal differently than the other because of too many assumptions and poor communication. It is usually agreed to verbally and sealed with a handshake.
Unfortunately, memories fade, and misunderstandings occur.
I often tell clients, “If they can say it – they can sign it.” People are reluctant to enter a written contract when dealing with people they are close to. However, this is one of the times that a detailed document will provide the most benefit by avoiding misunderstandings and disputes that stem from them.
Other than favorable terms, you should treat this transaction like you would if selling the property to a pleasant stranger. Have a detailed written agreement drafted and use a professional to prepare the deed and other closing documents and handle your transaction’s details.
Just because your family owned the property for years, do not assume it is problem free. Unfortunately, just because you do not know about a problem does not mean problems do not exist.
You may want a professional home inspection to identify any material issues.
You should also consider purchasing a title insurance policy to protect against unknown ownership issues.
These problems might not be discovered until your sister tries to sell the property years later.
The easily solvable problem found now can become a giant hurdle a decade from now.
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