Well, we are considering the purchase of the farmhouse, barns and close to 100 acres from my in-laws. Back in the late 50's they bought this farm and built a new house at one end of the property and moved into that. They have always rented out the farmhouse at the other end(not the barns or land) but they're getting tired of being landlords. Previous tenants have started fires, stolen items from the barns, skipped town, etc. My in laws have always farmed the property with crops and beef cows and he has been very generous to us regarding hay, straw, wheat, oats and firewood from his land. The farmhouse is in need of some remodeling, but nothing major, the barns and land are perfect for our needs. We are trying to thoroughly think through this important decision and look at all the possible problems. The only problem that we foresee is from my brother in law. He does not share in any of our homesteading ways and would like to purchase the home for himself. Actually, he is 32 and still lives with mom & dad has no clue what it would be like to live on his own. If he were to move next door, he would still have mom do laundry, supper, etc. (and she'd do it, too) He has no interest in the barns or land. He does not understand our quest and search for more land, or the perfect barn. My question is.... what advice can anyone give regarding such sales to/from family members? Is there something that I should be aware of that I might be missing? Thanks.

-- Charleen in WNY (harperhill@eznet.net), September 28, 2001

Answers

Be sure that whatever arrangements you come up with, that you get them in a contract and spend the money for a lawyer to advise you on the settlement. If your in-laws are going to let you make payments with no bank involved, you have to have in writing what happens if they should die. You need to protect your rights to the property legally, particularly with the brother-in-law in the picture. If part of the deal is to let your in-laws live on the property, you should have those parameters in writing as well and what will happen if they have to go into a nursing home, etc. The biggest mistake people make when going into agreements with friends and family is to think they do not need a lawyer because everything is friendly, friendly. But things change and sometimes each person's expectation of what the deal was, can be different and create hard feelings. Also, you should have a provision in there as to what happens if you and your husband get a divorce (even though that is not in your mind to ever happen, things can change). Also, have clauses as to what happens if either of you become unable to work or can't find a job and you can't make payments. This is where a lawyer who has experience in these kinds of contracts is absolutely essential. I am not a lawyer but I have seen good deals go south so you want to learn from other's experiences. Good luch and boy I wish I had your opportunity!!!

-- Colleen (pyramidgreatdanes@erols.com), September 28, 2001.

Yes there is. get you a good realestate lawyer. i dont reall like lawyers but theres times when you nee them and this is one. Bob se,ks.

-- Bobco (bobco@kans.com), September 28, 2001.

Please, please get everything in writing. You can't afford not to get a lawyer. Believe me, things will happen... speaking as someone who has been down the in-law road before!

-- Melissa (cmnorris@1st.net), September 28, 2001.

I agree with the lawyer bit, and pehaps get your own, don't share one. Family agreements can get VERY messy. We've had experience there too.

-- Trisha-MN (tank@Linkup.net), September 28, 2001.

Ohh Definitely spend the money on the Lawyer! I did not and it is how I am now located in Mississippi!!! It could happen to you too!;]

-- bj pepper in C. MS. (pepper.pepper@excite.com), September 28, 2001.

Get it in writing, get it in writing, get it in writing!!! We entered into a somewhat similar situation, we have and continue to have a great relationship with my in-laws and being a trusting sort I would have shaken hands on an agreement-but husband and father in law said no, lets get a lawyer do it right. I won't go into details, just that there was no way of knowing that his very healthy Mom would be diagnosed with Lou Gehrigs disease, and that one of the sibs marriage would blow apart and other things that threatened the security of this place. Its worked out fine, for us because they did look ahead and do what needed to be done. Make sure you work out an agreement with the B-i-l- so he can't sabatoge you later-best of luck!

-- Kelly (markelly@scrtc.com), September 28, 2001.

I guess I should have elaborated a little more on the subject. Yes, of course, we would have a lawyer. I didn't even think that land and deed transfers could occur without one. I realize that there are filing fees and other charges that can be handled personally and save a few lawyer bucks, but it goes without saying that a lawyer would be involved.

My in-laws intend to divide the area of the land that their house is on and keep that for themselves in their name, and sell the balance of land with the house & barns. This way, there will be separate properties and they can still have use of the barns and land if we (or bro-in-law) would purchase it. My dad in law's help on the farm is invaluable to us. We would not have them as mortgage holders, we would continue to use the bank that we are now using, since we are pre-approved. Thanks ever so much for all the good intentions and advice. No, it's not the ideal situation but compared to what we have now, it's great!

-- Charleen in WNY (harperhill@eznet.net), September 28, 2001.

I might suggest trying to see if you can make a deal for the ENTIRE property, including the new house in which your inlaws currently reside and give them a 'life estate' in the property. That way you're guaranteed you'll never have to worry about anyone else moving in there. They, on the other hand, wouldn't ever have to worry about property taxes or any other assessments on the property as they wouldn't own it any longer. They would, however, retain full rights to use the property for so long as they lived. You can do a deal like that with any number of variations but it's a great plan for the situation you have. If you can afford a premium over what you're paying for the rest of the land it might well be something to consider. Talk it over with a good real estate attorney before you present the idea to them. He can probably give you a list of advantages to them. I hope this helps.

-- Gary in Indiana (gk6854@aol.com), September 28, 2001.

Consider the advice of Gary in Indiana. My wife and I just bought her parent's farm - the entire farm, with her parents' house and a few acres carved out in a life estate for them. Although we can do with the rest of the farm as we please, no one can take the house from them so long as they live, and should they pass away, there will be no real estate issues to deal with her siblings - as complete ownership of those acres and the farm house passes to us. I think her parents have some comfort knowing that the farm will pass down a generation without being sold to settle a dispute (not that her siblings are prone to dispute though). Maybe even more importantly, there is a tax advantage for your inlaws if they sell their primary residence with the farm (even if they mainatin a life estate)- as they pay no capital gains tax on the value of the house and the few acres that can be justified as going with the house. I am assuming that in the case of your inlaws (as was the case with my inlaws), their tax basis (what they paid for the farm) is very low given that they bought it many years ago. They will have to pay capital gains tax on the difference between the price they paid and the price you pay (for everything but the principle residence). It sucks, as the gov't does not adjust the basis for inflation - which means your inlaws end up paying tax on gains they don't really realize given the change in the value of a dollar over the many years they've owned the farm. (if they paid $5,000 for the farm in 1950 and sell it to you for $105,000 in 2001, they owe the fed gov't tax on a $100,000 gain) Selling the principle residence with the farm can help this issue substantially.

finally, read this!!! it covers many issues you might be thinking through right now. I thought it was a great reference and something you can print out and show your inlaws to start the discussion about the various details. http://ohioline.osu.edu/b862/b862_1.html

-- thomas (thomas@inr.net), October 01, 2001.