Inherited family vacation home proves too valuable to keep
#406 in a series of true experiences in real estate
September 2002, Hills Newspapers
We had a visitor this week, a man who came to discuss his family’s vacation home. He wanted to find a way to keep it for his children and grandchildren.
The house, located in a small California seaside town, was built around 1900 by the man’s grandfather. All of the generations since then had vacationed there and had many fine times, but now the elders have died, and our visitor and his sister have inherited the house.
The sister lives a distance away and does not want to own the house any longer. She’d be glad to sell her half to her brother, and he’d be glad to buy it except that investigations have shown that the house is worth more than $500,000.
What was built so long ago as an affordable getaway for the grandfather’s family is now so valuable that neither of the heirs can afford to own it alone. A loan would have to be taken out by one to pay off the other, and the payments, plus the cost of taxes and insurance, would be around $1800 a month, far more than is reasonable for a place used quite infrequently.
We spend a couple of hours talking to the heir, and he tells us what he has looked into before meeting us. In fact, he has been so thorough, that we can’t think of much to add.
First he hired a professional appraiser to arrive at a value, then had a thorough physical inspection performed and got ballpark estimates of what needed work will cost. It occurred to him that it might be possible to split the land the house is on, to sell off a portion and pay his sister her share. And he spoke to his children, and even a cousin, about buying the house to keep it in the family.
He talked to real estate agents in the area where the house is located about the possibility of renting the house either year-round or seasonally.
Unfortunately, all of the information he had collected was discouraging. There was no family member who could afford the cost of a purchase and repair of the house. Around $40,000 would be required to make the house rentable year-round. Also, management would be needed, and by whom? Plus it hardly makes sense to have the place rented all the time because then the house would not be available for family vacations.
Short-term rentals would take even more management — advertising and interviewing, cleaning between occupants, and so forth — and would not produce enough income to cover expenses.
The land split idea might have some merit, but our visitor had not been able to determine what the value of a buildable lot in that location would be. He had been told by the appraiser that with no vacant land in the area, there are no comparable sales. This may mean that there is a market for land, but there are some problems with this, too.
While the county building department people seemed to think a lot split might be possible, the whole area is on septic systems, and the portion of the land that would be split off contains the septic tank and field for the house. These would have to be relocated closer to the house. The resulting lot would be narrow and smaller than standard and privacy for both lots would be severely compromised.
Our visitor showed us photos of the house, quite a charming place with its wide front porch, turn-of-the-century clear heart redwood interior and fir floors. He told us what is wrong with it. The heat is poor, many windows have rotted, the septic system needs work. And biggest of all, powder post beetles have been chomping on the structural members for a long, long time. There are so many beetles that the inspector who looked at the house thinks that the house will need to be tented and fumigated.
We now talked about the very heart of the matter. Why keep the house? Does the man’s family use the house? Do they love it, are willing to sacrifice to keep it?
Our visitor had gone to a lot of trouble, spent a lot of time looking at his options. Was this because he can’t bear to let the property go to new owners?
No one, he told us, has used the house much in recent years. The location is a number of hours from where all the family members live and they’re all busy with their own lives. They like the idea of going there, but they seldom go.
It’s fun to be near the ocean in the summer, but because the house is not insulated, it’s cold and uncomfortable in winter. The only part of the family to occupy the house for more than a few days in the last few years has been the sister, and she’s the one who wants to sell.
“So,” we asked, “Is anyone going to feel terrible if the house is sold?”
No, was the answer. “But the house was built by my grandfather. It just seems a shame not to keep it in the family.”
“It is too bad,” we agreed, “that the house has become so valuable. Your grandfather couldn’t have anticipated that happening. If it were worth only $30,000 or $50,000, you wouldn’t have a problem.”
“But as it is, the bad news is that the property you’ve inherited is so valuable that you can’t afford to keep it. The good news is that, if you sell, you’ll get half the proceeds.”
