Re: buy-out of house share
Aja,
Good suggestion on the "double-bind" mechanism. It is the ideal solution in the case of two parties who want to split an asset but works best when sole ownership of the asset would be equally valuable to both parties.
The problem for brother B (the one leaving Dublin) is that A (the one staying) knows that B doesn't want the house.
If B believes A's offer undervalues the house and B exercises his option to purchase at the price of the offer, he'll end up with an asset he'll need to sell and will have to pay yet another set of transactions costs (which economists would describe as a deadweight loss).
Therefore, A will price this into his offer and B won't get as much as he would have got had he (B) been able and willing to stay on in the house.
The discount at which the asset will be purchased should equal exactly the disposal costs that would arise for B in selling the house after buying it from A.
While it's a fascinating logical conundrum, it's a horrible situation and it points, as ever, to the critical importance of settling on an agreement in advance of property purchase for the system to be employed in the event of a subsequent termination of the agreement.
Do solicitors not raise this as an issue at the time of such initial purchases? If not, why not?