740 Canterbury Dr
Dear Jo, Stu, and Katy:
This letter is to review my recommendation for dissolving our partnership of the Higgins Lakes Cottage. As you know,
we've jointly owned it for years, however, times and personal situations changed and it is now time to move in a new direction. My goal is to lay out the facts and offer a recommendation that is fair to all of us.
To begin with, I requested a valuation appraisal of the cottage. The estimated value was $665,000. However, this estimate is unrealistically high for various reasons. First, it does
not sufficiently consider the fact that a portion of that cottage is on the Morley's lot or consider the fact that we have a signed agreement with Rob stating that the cottage can remain in place until renovated. If a renovation occurs, it must then be physically moved off their lot. Of course, there is a significant amount of expense involved to adhere to this agreement, and this reality is not factored into the appraisal. In addition, the agreement with the Morley's does not transfer to some unrelated buyer of the cottage. This means that it would be
difficult for a buyer to obtain a mortgage or clear title to the property and, therefore, decreases its value. This, too, is not factored into the appraisal.
Moreover, when the cottage is renovated, not only must the portion on the Morley's lot be removed, but Lakeside and Gerrish Township
set back rules must also be observed. Again, this affects the true value of the property and is not included in the appraisal.
In total, these realities are profoundly significant and, if considered
in the appraisal, severely impact the valuation.
Additionally, the cottage is essentially unusable in the winter. Although difficult, the cottage may be retrofitted for winter use.
However, winterizing it may trigger the requirement for the cottage to be taken off the Morley's lot. This fact is not included in the
I also, note that the cottages referenced in preparing the appraisal were not accurate or reasonable comparisons. For the most part, they included relatively new, lake front cottages, not 125 year old cottages in established associations with numerous common areas. As a result, the comparisons are of little use in the valuation determination.
These real and compelling factors lead to my conclusion that the true value of the cottage is significantly less then the estimated amount specified in the appraisal.
Truly, I am not interested in this cottage being a source of conflict within our family. To this point, no one has suggested to me their interest or intent to purchase the whole of the cottage. Consequently, I propose to purchase the cottage and all its contents for $600,000. This offer is fair and reasonable and is contingent on acceptance by each individual with an interest in the cottage.
If one or more are not interested in this proposal, the only choice will be to file for a court order to have the cottage sold. As you may be aware, any joint owner of a piece of property can seek an order to have the property sold. The court will then order the cottage
sold. The court will appoint a realtor to conduct the sale. You may also be aware that the costs of the realtor, all court costs, and the attorney fees incurred in obtaining the sale are taken out of the proceeds before distribution. The customary real estate commission is 7%. For example, if the cottage sold for $600,000, the amount of commission is $42,000. Then, assume court costs and attorney fees to
be $25,000 to $30,000. The resulting value is $533,000 ($600,000 less $42,000 less $25,000). The cottage is the same, regardless of how it
is sold. The only difference in selling before a court filing or selling after a court filing is that after the filing each 1/3 interest in the cottage incurs about $25,000 in costs, real estate
commissions, and attorney fees associated in obtaining the court order. Additionally, an attorney hired to represent an individual will be paid by that individual.
I've provided my best effort to establish a fair and reasonable value for the cottage. Please let me know whether the above proposal is acceptable to each of you. A response by September 13, 2006 is most appreciated.
I do not have the time nor the stomach to go into all the factual errors in this e-mail tonight, but give me a good nights sleep and I shall.