If my siblings and I inherited some property with a loan attached and 1 of them wants to buy our shares from us but can’t qualify for a conventional loan what are our options?

UPDATED: Sep 30, 2022

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If my siblings and I inherited some property with a loan attached and 1 of them wants to buy our shares from us but can’t qualify for a conventional loan what are our options?

We would like to sell to 1 sibling at fair market value but their income may not be conducive to doing a conventional loan. It is a plot of land that was originally sold to our parents as 2 tracts (plots) together totaling 2.93 acre. I believe they are equally sizes. Only one plot is developed, could we split the property into the two tracts and sell our sibling just the one developed maybe at a price which is more conducive to her income?

Asked on December 12, 2015 under Real Estate Law, Florida


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

You write that the property has "a loan attached." Before doing anything, check the terms of that loan--sometimes, loans require that they be paid in full if you sell any part of the property, for example. You need to make sure that whatever you do complies with the terms of the existing loan.
That said, assuming that there are no prohibitions in the loan, you could do what you suggest, and just sell your sibling part of the property at a mutually agreed upon price. Or you could finance her purchase yourself, by letting her pay over time pursuant to a promissory note while keeping a right to foreclose if the note is not paid--i.e. give her a private mortgage. Alternately, you could lease it to her with an option to buy, with some (or even all) of the lease payments counting towards the eventual sale price. There are several options. 
A good way to proceed would be to take the deed, title, and the documents for the existing loan to a real estate attorney and meet with him/her with your siblings: the lawyer can explain what you can do, you and your siblings can tell the lawyer what you'd ideally like to do, and the attorney can then help you accomplish that in the best way.

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