Family Financial Dilemma

[TwiceHorn 31534]

So, I own, jointly with my cousins, approximately 500 acres of timberland in Arkansas.  This was our grandparents' homestead and farm.  It has passed through our parents to us.

It is well populated with pine and hardwood and we cut every other year and it generates a tidy little sum for both our families.

From the other side of my cousins' family, they own massive amounts of timberland, I'm guessing thousands of acres, probably tens, maybe hundreds of thousands.  The grandfather on that side reacted to the depression by buying land.

In any event, they would like to consolidate ownership of the land and I am agreeable to that in principle.  They live up there, hunt on it, have a cabin, have enough timberland that they use depletion accounting, etc., whereas I am going to die without issue.

Here is the rub.  My cousin got an appraisal of the land in question by a forester with whom we have no prior relationship.  It is about 20% higher than a recent appraisal of similarly situated land done for a probate of my "uncle in laws" timberland (the aformentioned other side of the family). about a year ago.  This appraisal was done by our forester that manages our land.  I trust them absolutely, and for estate purposes, one would think they'd "aim high" to establish a high stepped up basis.  But it is not the same land and we're talking about the average per acre, so some of it is equivalently or higher valued and some is lower valued.

I have asked for copies of the appraisals.  I am also inclined to ask our forester to explain the "discrepancy."  As in, is our land more valuable?  Is it the Covid inflation?  Or just assholes, opinions, etc.  This may cause him a conflict of interest, I'm not sure.  Foresters are similar to realtors.

On the one hand, I feel like my cousins, whom I have always gotten along with tremendously, are trying to skin me a little. On the other, I don't want to demand absolute top dollar from family, either.  But, we're all well off, and they're probably better off than I am, that is, they can afford it and I am kind of doing them a favor.

I am kind of inclined to split the difference on the two appraisals, unless the forester, if he will opine, says the two appraisals are just apples and oranges.  In which case I'd be inclined to give a 10% discount just because.  Maybe more.

Another way to approach it is to just offer a round number. Using the high appraisal, the purchase number is X + 1%, with X being a very round, appealing number.  Using the low number, it's X - 20%.  I could just offer X.

This is fucking hard to do with family.  In a mediation or arms-length negotiation, X would be my floor.

Thoughts welcome.

Edited September 22, 2021 by TwiceHorn

[Guest]

get a third appraisal.

agree to the approach beforehand.  Nobody should be expected just to roll with what one guy says.

 

[TwiceHorn 31534]

5 minutes ago, slorch said:

get a third appraisal.

agree to the approach beforehand.  Nobody should be expected just to roll with what one guy says.

 

Yeah, we had talked about this before Covid and everyone got distracted.  We were going to get an appraisal "together," so I was a little surprised to find out that he did one on his own.  But, he didn't try to bury it.

So, another appraisal, on my nickel this time, and average them?

[Guest]

I guess it would depend on how "off" I thought their guy was.

[TwiceHorn 31534]

39 minutes ago, slorch said:

I guess it would depend on how "off" I thought their guy was.

Perhaps I was unclear.

The recent appraisal of our property is the high one.  The cousin is cheaping me or suspicious of it based on another appraisal of similar but different property a year ago.

I didn't immediately think of that because this new appraisal is what we probably would have done had we done it together.

Edited September 22, 2021 by TwiceHorn

[immamac 43013]

Are they buying you out or are you selling it on the open market? 

Just list it, get an offer or 10. Don't accept any and tell him he gets to match the lowest offer. 

[TwiceHorn 31534]

2 minutes ago, immamac said:

Are they buying you out or are you selling it on the open market? 

Just list it, get an offer or 10. Don't accept any and tell him he gets to match the lowest offer. 

Buying me out.

[immamac 43013]

Only way to get fmv is to involve the market

[TwiceHorn 31534]

I'm not interested in FMV, per se.  And listing it would have costs.

Edited September 22, 2021 by TwiceHorn

[Guest]

54 minutes ago, TwiceHorn said:

Perhaps I was unclear.

The recent appraisal of our property is the high one.  The cousin is cheaping me or suspicious of it based on another appraisal of similar but different property a year ago.

I didn't immediately think of that because this new appraisal is what we probably would have done had we done it together.

Maybe I am not reading correctly.  The forester appraised it at a higher value, but you're concerned the cousins are skinning you a little?

[TwiceHorn 31534]

12 minutes ago, slorch said:

Maybe I am not reading correctly.  The forester appraised it at a higher value, but you're concerned the cousins are skinning you a little?

There are two foresters.  Ours and a "third party."

Cousin commissioned an appraisal of the land in question that came in higher than one done by our forester on similar property a year ago.

The obvious answer is "not the same property," so the higher appraisal "controls."  I think cuz was shocked at how much higher it was than the other.  Cuz suggested that the higher appraisal was too much.

Edited September 22, 2021 by TwiceHorn

[Gil Bang 26007]

Do you have any interest at all in owning all the land?  

The old "one cuts, the other chooses" works well.  

Meaning, they name a "fair" price, and you can either sell your share at that price, or buy their share.  Everybody's got an incentive to play fair in that scenario.

[Brew 3049]

Story is not clear, it sounds like they want to buy you out. You had an old appraisal, they ordered a new one that came in 20% higher than the old one and you both are questioning it. Typically both sides are allowed to get appraisals, but it sounds like their appraisal is already higher than you thought it would be. Under that scenario it sounds like you can negotiate anywhere up to the new appraisal, you just need to decide where you are comfortable or just hold them to the appraisal.

[TwiceHorn 31534]

42 minutes ago, Brew said:

Story is not clear, it sounds like they want to buy you out. You had an old appraisal, they ordered a new one that came in 20% higher than the old one and you both are questioning it. Typically both sides are allowed to get appraisals, but it sounds like their appraisal is already higher than you thought it would be. Under that scenario it sounds like you can negotiate anywhere up to the new appraisal, you just need to decide where you are comfortable or just hold them to the appraisal.

They want to buy me out.  Peviously, they had proposed that we get an appraisal and go from there.

We resumed discussions and cuz hauled off and got an appraisal without my knowledge or consent, although that was the basic plan.  So we hadn't agreed in advance that the appraisal would be conclusive or offer guidance, or what.

He was shocked that it was 20% more than "similar" timberland, same county, same type of timber, done about a year ago by our trusted forester for a purpose (estate valuation), where it should have been "highish."  He either doubts the high appraisal or is negotiating or both.  And I have vague general doubt.

Your last sentence is it.  I can't figure out how big a dick to be to family.  Where to split the baby.

I guess I would prefer not to do yet another appraisal, but just work with what we've got.

Edited September 22, 2021 by TwiceHorn

[DalTxHornFan 3116]

FWIW, our family has some East Texas timberland.  Our forester has recently advised us about a big change in his approach to timber management.  He has moved from a 35 year to a 25 year management horizon.  He says that almost nobody is interested in anything bigger than 2x4s these days, and if they want something bigger they will use the smaller boards and adhesives to make what they want.  I don't know if this industry development has anything to do with the change in valuation, but obviously a 25 year horizon vs. a 35 year horizon would impact the valuation a bunch. 

[TwiceHorn 31534]

3 hours ago, Gil Bang said:

Do you have any interest at all in owning all the land?  

The old "one cuts, the other chooses" works well.  

Meaning, they name a "fair" price, and you can either sell your share at that price, or buy their share.  Everybody's got an incentive to play fair in that scenario.

That was the basic decision.  They asked me sometime before covid if I would consider letting them buy me out.  I thought about it for a while, decided it made sense and said I was open to it.  It slipped because of Covid, deaths, lymphoma, etc.

I'm giving up the biannual payment, but I think I can do about as well in the market.  I'm giving up land ownership, but if TSHTF, I would be welcome up there.  I'm also avoiding the risk of tornados and forest fires, which are ever-present.

Well it resumed this week with the news that cuz got an appraisal.

This isn't an arms-length thing.  I want a reasonable value, not top fucking dollar from a grinfuck negotiation or game theory.

[TwiceHorn 31534]

5 minutes ago, DalTxHornFan said:

FWIW, our family has some East Texas timberland.  Our forester has recently advised us about a big change in his approach to timber management.  He has moved from a 35 year to a 25 year management horizon.  He says that almost nobody is interested in anything bigger than 2x4s these days, and if they want something bigger they will use the smaller boards and adhesives to make what they want.  I don't know if this industry development has anything to do with the change in valuation, but obviously a 25 year horizon vs. a 35 year horizon would impact the valuation a bunch. 

The best use our timber has been put to is utility poles, if the growth is tall enough and straight enough.  Otherwise, it's chipboard, OSB, and pulp.

I'm getting copies of the appraisals as I think that's minimal due diligence.  So I'll see the methods used, I presume.

[52-80 19241]

deforest the entire place and start planting sapplings to sell to companies as CO2 credit and then cut it all down and repeat again

[baboso 6057]

Optimal would be to get it reappraised; perhaps by the forester that did the "old" one.  If you absolutely trust him, take that valuation and live with any differences between it and the "new" higher appraisal.  Quickest would be to tell cuz I'll take the average of the two appraisals we have.

[Brew 3049]

There is no way I would spend money on a new appraisal if you already think you are high side. I’m. It sure what another number is going to add to the discussion. He set his side when he ordered an appraisal. If you’re more comfortable at the old number, then just take it. Otherwise, just average them. It sounds like keeping the peace is at least in the relative vicinity of importance as getting market value, so giving any reduction off the higher appraisal should be met with some appreciation.

Why did they order the new one? Surely with the current market trends for land, timber, etc. they didn’t expect it to go down in value, so the issue is it just went up more than everyone expected?

[immamac 43013]

This is a troll thread. If you don't care about FMV just pick a number between the appraisals and call it a day. Who cares? Apparently you don't. 

[Jerry Callo 8725]

Tell your cousins that at that the new appraiser's value, you'd just like to keep your interest.  Give's them the option of countering the appraisal.

[hornbri 1402]

15 minutes ago, immamac said:

This is a troll thread. If you don't care about FMV just pick a number between the appraisals and call it a day. Who cares? Apparently you don't. 

Pretty much this. It doesn't sound like you care that much about the money and more want to be fair. So just average the 2 numbers and call it a day. 

[Handcruser 2805]

Knock a little off the newest appraisal and ask for a lifetime of firewood in return.

[Handcruser 2805]

But I wouldn’t sell that land.

[TwiceHorn 31534]

36 minutes ago, immamac said:

This is a troll thread. If you don't care about FMV just pick a number between the appraisals and call it a day. Who cares? Apparently you don't. 

Fuck dude.

[TwiceHorn 31534]

42 minutes ago, Brew said:

There is no way I would spend money on a new appraisal if you already think you are high side. I’m. It sure what another number is going to add to the discussion. He set his side when he ordered an appraisal. If you’re more comfortable at the old number, then just take it. Otherwise, just average them. It sounds like keeping the peace is at least in the relative vicinity of importance as getting market value, so giving any reduction off the higher appraisal should be met with some appreciation.

Why did they order the new one? Surely with the current market trends for land, timber, etc. they didn’t expect it to go down in value, so the issue is it just went up more than everyone expected?

Yeah, this is where I am "at."

I think he might have ordered it just for this purpose, as that is what we had more or less agreed to do.  They might have had some other appraisals done that this was part of, because, as I said, they have a lot more timber holdings than I do, do depletion accounting and other such things that come with that.

I don't know that it would be expected for this type of asset to undergo the Covid inflation that's occurring elsewhere.  I don't know.

In some ways, this is a very good property because of roads and access.  On the other hand, I'm not sure the timber on it is the best, and there seems to remain a lot of hardwood on the tract, that's usually cut with the pine, and brings something, but never goes away.

[Brew 3049]

47 minutes ago, immamac said:

This is a troll thread. If you don't care about FMV just pick a number between the appraisals and call it a day. Who cares? Apparently you don't. 

Some people actually like to talk through things on here.

[Bevo 13600]

9 hours ago, TwiceHorn said:

This isn't an arms-length thing.  I want a reasonable value, not top fucking dollar from a grinfuck negotiation or game theory.

That makes sense but is very difficult in negotiations even with family. Everyone wants to get the best deal possible even Bill Gates. Counterintuitively, even the super rich who don't need the money, love the game. If the appraisal is X everyone will want to pay X-some amount. It is why Kohl's is so popular even though they mark everything up before offering a discount. So, either be happy with the deal and don't ever look back or find a reasonable amount and come to an agreement. If you don't know what a reasonable amount is then you need to find out.

[torre 1286]

2 minutes ago, TwiceHorn said:

 

I don't know that it would be expected for this type of asset to undergo the Covid inflation that's occurring elsewhere.  I don't know.

In some ways, this is a very good property because of roads and access.  On the other hand, I'm not sure the timber on it is the best, and there seems to remain a lot of hardwood on the tract, that's usually cut with the pine, and brings something, but never goes away.

Originally,  were you satisfied with their explanation of "joint ownership", or do they know something you don't  ?

Difficult situation when dealing with Family.    Good luck my friend in making the best decision  ! 

[TwiceHorn 31534]

5 minutes ago, Brew said:

Some people actually like to talk through things on here.

Exactly.  I know how to hardcore negotiate stuff, but I am trying to temper that impulse in the interest of family peace.

If someone other than my cousin raised an appraisal of different property and a year old, I'd laugh them out of the room.  But I can't do that here, or probably shouldn't.

[TwiceHorn 31534]

20 minutes ago, torre said:

Originally,  were you satisfied with their explanation of "joint ownership", or do they know something you don't  ?

Difficult situation when dealing with Family.    Good luck my friend in making the best decision  ! 

It's jointly owned because it descended from my grandparents to my mother and her brother, and to their respective children, me and my cousins.

I don't know the full ins and outs of why they want it.  But the main thing is that I have no children.  Assuming I predecease my wife, the property could theoretically go "anywhere," and joint ownership with "strangers" is undesirable, I think understandably, to anyone.  There are probably some other marginal advantages to them of increasing their timber holdings.

[ERhine 1906]

You’re an attorney who at some point during your career has negotiated something, correct?

There are two appraisals done. The one done by the buyer is 20% higher than yours? And you’re asking what to do?

This cannot be a serious thread.

[TwiceHorn 31534]

39 minutes ago, ERhine said:

You’re an attorney who at some point during your career has negotiated something, correct?

There are two appraisals done. The one done by the buyer is 20% higher than yours? And you’re asking what to do?

This cannot be a serious thread.

Not my appraisal, another one..

And, I am specifically not wearing my lawyer hat for this.

Cmon.  Some of these responses are dumber than you're trying to make me out.

[destroya 380]

Ask how much he wants to pay to buy you out. If you’re happy with that number sell, if not don’t. 

[Chewbacca 7783]

Ask how much he wants to pay to buy you out. If you’re happy with that number sell, if not don’t. 

Yep. Nobody says you have to sell. If he offers you a number you like, do it. If not, don't.

[TwiceHorn 31534]

17 minutes ago, destroya said:

Ask how much he wants to pay to buy you out. If you’re happy with that number sell, if not don’t. 

That's vaild.  I kind of had stuck in my mind that I would make the first offer, but no reason for that.

I would like to honor the fact that cousin thinks the current appraisal is a little high. He is probably "negotiating," but I think there's a nugget of truth there. 

The obvious way to do that is to split the difference between the low and the high.  But I think that gives the low appraisal too much weight, inasmuch as it's not the same land at the same time.

So I would like to come up with a response that "honors" the skepticism of the high appraisal, while not giving the low one too much weight. 

[Dahobbs 17682]

My take:

if you're talking about a price difference of $100,000 or more, then I think its fair to insist on something close to the appraisal of the actual land being sold. An appraisal of another piece of property just isn't relevant. 

If the difference is substantially less than $100,000, then ask Cousin to give you what he thinks is fair between the two appraisals and be done with it. 

[TwiceHorn 31534]

4 minutes ago, Dahobbs said:

My take:

if you're talking about a price difference of $100,000 or more, then I think its fair to insist on something close to the appraisal of the actual land being sold. An appraisal of another piece of property just isn't relevant. 

If the difference is substantially less than $100,000, then ask Cousin to give you what he thinks is fair between the two appraisals and be done with it. 

Yep, yep.  This is about what I think.  What kind of "family/friends" discount off the high appraisal would you think is reasonable?  10% is the split, so 5%?

[Dahobbs 17682]

3 minutes ago, TwiceHorn said:

Yep, yep.  This is about what I think.  What kind of "family/friends" discount off the high appraisal would you think is reasonable?  10% is the split, so 5%?

Yeah, given the valuations that is what I would do. If he insists it is too high, then he is going to need to pay for another appraisal and y'all just accept the average between the two. It isn't a small amount of money and there is no reason to be exceedingly generous to them. 

[royiv 9349]

This is a long way to go to establish your 2% status to the board.

[TwiceHorn 31534]

1 minute ago, Dahobbs said:

Yeah, given the valuations that is what I would do. If he insists it is too high, then he is going to need to pay for another appraisal and y'all just accept the average between the two. It isn't a small amount of money and there is no reason to be exceedingly generous to them. 

The difference is more than $100k.  Another data point, every property listed with a price on our forester's site would value out higher than the high appraisal, so it seems the high one isn't barking at the moon.

[ztejas 43533]

Three cousins go in on a patch of timberland in Arkansas.

The first cousin says...

[TwiceHorn 31534]

14 minutes ago, royiv said:

This is a long way to go to establish your 2% status to the board.

Ha, yeah.  It really is amazing.  My mother's parents were just plain ol farmers, no education beyond basically one room schools in the early 20th century.  But they got two kids college educated and left no inheritance but this farmland.  I have photos of my grandfather planting the land with pine seedlings shortly after he and my grandmother moved to town after WWII.

The "other side of the family" I mentioned, the "patriarch" was a doctor, so ostensibly much higher income than my grandfather, but lost his ass on whatever investments he had during the depression and so then plowed all his money into land before timber was quite as big a thing as it is today.  That side of the family are large benefactors to pig, and now that wealth has descended upon my cousins.  Pretty sure they have complete fuck you money, so I don't need to feel bad about anything, really.

Edited September 22, 2021 by TwiceHorn

[Chewbacca 7783]

22 minutes ago, TwiceHorn said:

The difference is more than $100k.  Another data point, every property listed with a price on our forester's site would value out higher than the high appraisal, so it seems the high one isn't barking at the moon.

If he wants to buy you out, he needs to make it worth your while.  That's how I would pitch it.  Say you're happy to do it at the right price.  Sounds like he's trying to lowball you, but he doesn't have any leverage.

[destroya 380]

Another thing, this seems like a situation where the only way the relationship isn't impacted is if you sell to him at a price he considers 'fair'

[TwiceHorn 31534]

26 minutes ago, destroya said:

Another thing, this seems like a situation where the only way the relationship isn't impacted is if you sell to him at a price he considers 'fair'

Good point.  It was kind of funny/sad.  He brought up the new appraisal and then the older one and was kind of stuttering around.  It was awkward as fuck.

Sidenote:  this is my actual cousin's husband, so only related by marriage.  But he's a super-good dude and has been a good friend/cousin for like 40 years.  The "girls," my actual cousins, are not "facially" involved in this and one of them who lives in Monroe with her retired airline pilot husband, is even less involved than the one in Arkansas, whose husband I am dealing with.  Ironically, both "the girls" have MBAs, while James is a plumbing contractor.

So even if James and I got fucking ugly about it, calmer forces would prevail over time.  We're not going to get fucking ugly about it.

I think we'll get past it regardless, but I'd like to minimize the awkwardness if possible.

Edited September 22, 2021 by TwiceHorn

[TwiceHorn 31534]

Another data point, for whatever its worth.  The property was appraised in 2005 at my mother's death for estate purposes.  As I kind of suspected, it has roughly doubled in value in that time, while also spinning off about 3-5% annual income, probably closer to 3%, particularly lately.

So, at the numbers we're talking, I should be able to replace the income easily with conservative investment, the growth, too, I think.  The higher the number, the more likely that is to be true.

[Dahobbs 17682]

9 minutes ago, TwiceHorn said:

Good point.  It was kind of funny/sad.  He brought up the new appraisal and then the older one and was kind of stuttering around.  It was awkward as fuck.

Sidenote:  this is my actual cousin's husband, so only related by marriage.  But he's a super-good dude and has been a good friend/cousin for like 40 years.  The "girls," my actual cousins, are not "facially" involved in this and one of them who lives in Monroe with her retired airline pilot husband, is even less involved than the one in Arkansas, whose husband I am dealing with.  Ironically, both "the girls" have MBAs, while James is a plumbing contractor.

So even if James and I got fucking ugly about it, calmer forces would prevail over time.  We're not going to get fucking ugly about it.

I think we'll get past it regardless, but I'd like to minimize the awkwardness if possible.

Personally, I think the only way it gets awkward is if you treat it as anything but a business decision. Small discount for family is ok. But if you let him walk over you because "family," it'll affect you even if you don't realize it. So long as you don't let it become anything but a business deal, then there is nothing for anyone to be hurt over. You don't owe them the property. 

[boilerhorn 1399]

11 minutes ago, TwiceHorn said:

Good point.  It was kind of funny/sad.  He brought up the new appraisal and then the older one and was kind of stuttering around.  It was awkward as fuck.

Sidenote:  this is my actual cousin's husband, so only related by marriage.  But he's a super-good dude and has been a good friend/cousin for like 40 years.  The "girls," my actual cousins, are not "facially" involved in this and one of them who lives in Monroe with her retired airline pilot husband, is even less involved than the one in Arkansas, whose husband I am dealing with.  Ironically, both "the girls" have MBAs, while James is a plumbing contractor.

So even if James and I got fucking ugly about it, calmer forces would prevail over time.  We're not going to get fucking ugly about it.

I think we'll get past it regardless, but I'd like to minimize the awkwardness if possible.

With MBAs, they should understand FMV quite well, even in the world of timber real estate.  A relative novice can spend a couple of minutes on the interwebs and determine a rough price-per-acre for Arkansas forest land (Price per acre as a function of overall acreage, etc.).  

The 20% delta on 500 acres is material and I think the 1 year old appraisal is irrelevant.  We Austin-based folks would definitely not sell our properties today based on a 12-month old appraisal.

You are clearly trying to keep familial peace and that is to be lauded.  However, the same should be expected from them and y'all should eventually agree to something that is darn close to FMV.