Valuation: 'as is' Market Value vs Projected Future value after development. Dispute

[sharynl]

Look at it from his POV - you're trying to screw him by getting a dev block cheaply.

What end result does he want - leave it empty, joint dev, rent it out & share costs & income or sell it & pay CGT ?

The most likely (& probably fairest) result is to auction it - either you or someone else pays the real market price, and not your hypothetical respective biased valuations.

Hi Keith - *** again the auction suggestion - my question about auctioning it is above, hope you can weigh in on that. ****

End result he wants? - well I've stated all this before but there are a lot of previous posts to scroll through. At first I wanted him and I to develop it together. That was a no-go, he wasn't interested. He was adamant against renting it out. He wanted to put it on the market 'as is'. He wanted the money as soon as possible and did not want to do the work to fix it up and make it worth more. Now the 'end result' he wants is the money he would have gotten if we had done that work already.

But please see the question about auctioning as everyone is suggesting auctioning but no-one is saying how it would get to that point.

Me, I wouldn't have wanted it like this at all but I'm OK to wait it out. I've done all the hard yards so far getting work (after being the main carer of the person who died leaving this situation), giving up my studies, cleaning up the place until I realised how nasty he could get, getting the loan.. while he's been impatiently waiting for the money to fall into his hands and listening to real estate agent appraisals.

 

[sharynl]

Why not disengage and just take your offer to purchase off the table? Won't he either come back and agree to your price, or suggest you agree to sell it on the open market (at which point you could choose to make an offer)?

Well, in my letter to his lawyer I said the bank's offer to loan me money has a use-by date.

I also said I've been offered another job which if I take it, will mean another at least 3 months before I can get another loan approved (the one I have is currently unconditionally approved).

As I said above, his lawyer has not responded. So I'm thinking they are about to hit me with Supreme Court action, or perhaps his lawyer has recommended he take it (I mentioned a lot in the letter that I'm sure he didn't tell his lawyer).

 

[S.T]

Send his lawyer a letter saying you want to auction it now and split the proceeds. Pretty simple?

 

[wylie]

End result he wants? - well I've stated all this before but there are a lot of previous posts to scroll through. At first I wanted him and I to develop it together. That was a no-go, he wasn't interested. He was adamant against renting it out. He wanted to put it on the market 'as is'. He wanted the money as soon as possible and did not want to do the work to fix it up and make it worth more. Now the 'end result' he wants is the money he would have gotten if we had done that work already.

He would have been happy to sell "as is" until he realised there is potential to make money? If so, then he must realise that without the money spent to increase its value, it can only be sold "as is".

But please see the question about auctioning as everyone is suggesting auctioning but no-one is saying how it would get to that point.

Wouldn't you simply tell him that you now agree you will be happy to sign a sales agreement to sell "as is". I don't see how he could then issue you with any paperwork or take you to court to force you to sell, if you tell him right now you are happy to sell.

Me, I wouldn't have wanted it like this at all but I'm OK to wait it out. I've done all the hard yards so far getting work (after being the main carer of the person who died leaving this situation), giving up my studies, cleaning up the place until I realised how nasty he could get, getting the loan.. while he's been impatiently waiting for the money to fall into his hands and listening to real estate agent appraisals.

Well, in my letter to his lawyer I said the bank's offer to loan me money has a use-by date.

I also said I've been offered another job which if I take it, will mean another at least 3 months before I can get another loan approved (the one I have is currently unconditionally approved).

As I said above, his lawyer has not responded. So I'm thinking they are about to hit me with Supreme Court action, or perhaps his lawyer has recommended he take it (I mentioned a lot in the letter that I'm sure he didn't tell his lawyer).

Unless I'm missing something, and if the only reason he would "lawyer up" and force you to court would be to force you to sell. If you agree to sell, then that is what you and he agree to do.

You can still buy it yourself, and if that doesn't work due to finance and/or job, then you probably just need to move on. Even having lost a lot of money to my nut job brother, I feel light as a feather. I don't ever have to look at him again. That is priceless.

 

[chindonly]

I would do the old Kerry Packer thing.

Prepare a contract in advance - He makes what he thinks is a fair and reasonable offer for you to buy him out.

If you don't accept, then he must buy your half at the same offer price.

Fair for everyone.

If he thinks it is valued higher, he should pay higher for yours.

 

[Dazedmw]

If we put it on the market tomorrow what is it likely to realise?

1. The value 'as is' ?

or 2. the value it would be worth if it was already subdivided and the existing house completely cleaned up, fixed up??

What you quoted from the valuation report suggested that costs associated with the subdivision had been deducted within the valuation calculations. Therefore the valuation is 1. The value "as is" not 2. the value it would be worth if subdivided.

If I said to you that you could sell "Property X" for $500,000 after spending $100,000 on some form of six month long development how much would you pay for it today? Probably about $350,000 (the $500,000 less costs less profit). That $350,000 is an "as is" valuation/amount even if it takes into account the proposed development.

Again I quote from your quote of the valuation report "...and deducting all associated costs...". This suggests the report is not 2. as you describe above.

Now it may be the valuer is a complete idiot who doesn't know what he is doing, but from what you have quoted of the report I would politely suggest that you haven't fully understood the valuation report and methodology used.

 

[Terry_w]

Can anyone answer that for me? Cheers

Whats the question?

Either owner could apply to the supreme court to get a trustee appointed to arrange the sale of the property. This will cost money for the court application, attendance and then a fee for the trustee. Around $20k at least in fees.

You could possibly bid at the aution and buy his share - but seek advice on this.

 

[wylie]

Terry, if the poster tells her brother's solicitor that she now has changed her mind and agrees to put the house to market, could she also say she wishes it to be auctioned to ensure it reaches market price?

If so, wouldn't that stop any money being spent on lawyers to get to the end result of having the house sold?

And, if the poster wishes to bid at the auction, it is clear that she has paid market value?

 

[Terry_w]

Terry, if the poster tells her brother's solicitor that she now has changed her mind and agrees to put the house to market, could she also say she wishes it to be auctioned to ensure it reaches market price?

If so, wouldn't that stop any money being spent on lawyers to get to the end result of having the house sold?

And, if the poster wishes to bid at the auction, it is clear that she has paid market value?

Yes she could do that - but should seek advice about bidding at the auction.

 

[Perp]

sharynl, do you perhaps already have a contract to purchase at a price fixed by a valuation, or something like that?

 

[sharynl]

Send his lawyer a letter saying you want to auction it now and split the proceeds. Pretty simple?

I don't want to auction it. There would be costs of the auctioneer and supreme court action etc. I think he may be ridiculous enough to . The only positive thing about auction is that he will have to admit market value is much less than the valuation he has engineered.

Not simple unfortunately.

 

[sharynl]

sharynl, do you perhaps already have a contract to purchase at a price fixed by a valuation, or something like that?

Definitely not. Nothing at all. I would have mentioned that.

 

[sharynl]

Terry, if the poster tells her brother's solicitor that she now has changed her mind and agrees to put the house to market, could she also say she wishes it to be auctioned to ensure it reaches market price?

If so, wouldn't that stop any money being spent on lawyers to get to the end result of having the house sold?

And, if the poster wishes to bid at the auction, it is clear that she has paid market value?

I haven't changed my mind. He can either send to auction (which would fetch around the price I've offered at a high cost as per the info received on here - thankyou!). Or he can try to bully me in other ways. Unfortunately for him, I think the lawyer letter threatening supreme court action might be the limit of his bullying capacity. And that backfired bigtime in that I was again stunned at how low he is prepared to go.

 

[sharynl]

Whats the question?

Either owner could apply to the supreme court to get a trustee appointed to arrange the sale of the property. This will cost money for the court application, attendance and then a fee for the trustee. Around $20k at least in fees.

You could possibly bid at the aution and buy his share - but seek advice on this.

Thanks Terry - Well, I suppose it then depends on how soon both of us want this ended. If he goes the supreme court route I'll definitely be seeking advice on buying the share I already have offered in writing at market value to buy.

I want this over, but have paid my share of the rates for this current f/y and have insured the property fully so my costs are pretty much covered and I'm not repaying the loan for the other share if I don't have the other share.

I live very cheaply and frugally. They don't, apparently. It really depends I suppose on when his wife wants a new car or holiday or expensive pet... And CGT looming if it drags on over 2 years which he's making it do.

 

[Terry_w]

Thanks Terry - Well, I suppose it then depends on how soon both of us want this ended. If he goes the supreme court route I'll definitely be seeking advice on buying the share I already have offered in writing at market value to buy.

I want this over, but have paid my share of the rates for this current f/y and have insured the property fully so my costs are pretty much covered and I'm not repaying the loan for the other share if I don't have the other share.

I live very cheaply and frugally. They don't, apparently. It really depends I suppose on when his wife wants a new car or holiday or expensive pet... And CGT looming if it drags on over 2 years which he's making it do.

This may be a good strategy - just waiting it out.

Or write back to his lawyer agreeing on an appointment of a trustee to sell it. No need to go to the Supreme court if you both agree.

 

[sharynl]

What you quoted from the valuation report suggested that costs associated with the subdivision had been deducted within the valuation calculations. Therefore the valuation is 1. The value "as is" not 2. the value it would be worth if subdivided.

If I said to you that you could sell "Property X" for $500,000 after spending $100,000 on some form of six month long development how much would you pay for it today? Probably about $350,000 (the $500,000 less costs less profit). That $350,000 is an "as is" valuation/amount even if it takes into account the proposed development.

Again I quote from your quote of the valuation report "...and deducting all associated costs...". This suggests the report is not 2. as you describe above.

Now it may be the valuer is a complete idiot who doesn't know what he is doing, but from what you have quoted of the report I would politely suggest that you haven't fully understood the valuation report and methodology used.

I would politely suggest that I do understand what they have tried to do. Sorry I cannot post the whole document and then you would also. I have tried to explain it and the quote probably just confused the issue.

Yes they have done the workings and deducted 'all associated costs' - not itemised but anyway.. Then they have ended up with (hypothetically) a single vacant block and a fixed up house on the other block. Then they have totalled what they reckon they could get for each of these separately after costs, added them together and come up with what they reckon the place is worth. Then. After subdivision. After reno's on the house. That is not what it is worth right now.

I think that's what somersofters call 'adding value' - except they are including the proposed added value. Do you buy an investment for what it will be worth after you've added the value by subdividing and/or reno'ing? Does anyone?

This might be the best way to explain - here is your example:

"If I said to you that you could sell "Property X" for $500,000 after spending $100,000 on some form of six month long development how much would you pay for it today? Probably about $350,000 (the $500,000 less costs less profit). That $350,000 is an "as is" valuation/amount even if it takes into account the proposed development."

------ what my point is, is that my brother has been told he could sell it for that final value and that is the amount he wants for it - they are claiming the "as is" value as what it will sell for! So in your example ***and these are not the actual figures of the real case*** he wants half the $500000 whereas I'm wanting to pay half of the $350000 ***** Note, Please nobody assume these are the real figs but taken from Dazedmw's example.

 

[sharynl]

Sorry to bump this again by answering the posts but I'm so appreciative of everyone who has taken the time to respond and wanted to answer all.

I've been working lots so it's taken me a while to get back to the comments.

Thanks again, I think I've got most of the info I was after, sort of confirming he can't come out of left field at me and I've covered all possibilities.

Lots of great info, support and suggestions, cheers!

I will post an outcome if there ever is one.

 

[wylie]

Without re-reading your posts, I'm confused why you cannot just agree to his request that it be sold and you split the proceeds. Why would that course of action require any court input? If he has engaged a solicitor in order to force you to sell why can't you simply list it for sale?

The only way to be sure it sells for what it is worth now is to auction it. Any other course could have him accusing you of doing something underhanded. You could still buy it at the auction if you see a way to make money.

 

[Perp]

I don't want to auction it. There would be costs of the auctioneer and supreme court action etc.

Like wylie, I don't understand why you don't want to auction it. There are no court costs if you agree to sell.

The auctioneer costs next-to-nothing; the agent's commission is a couple of percent, but seems worth it if it means you get the property at the much lower price that you think represents market value.

 

[keithj]

Like wylie, I don't understand why you don't want to auction it. There are no court costs if you agree to sell.

The auctioneer costs next-to-nothing; the agent's commission is a couple of percent, but seems worth it if it means you get the property at the much lower price that you think represents market value.

Like others, it's coming across to me that YOU are the obstacle in getting a successful resolution to this issue.... however it does appear that we only have part of the story.

Looks like brother wants to sell for a fair price. You want it to buy his half cheaply directly from him, but he wants a little more because of it's potential. He's threatened to take out an action to force you to sell on open market & thereby determine a fair price, but you want to avoid REA/auction costs & have refused.

Is this a fair synopsis ?