Buying or Selling a Home/Joint ownership

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Expert: - 8/30/2008


Question
My husband and I and my son and his wife purchased a home together 3 years ago as an investment with plans to stay a while.  However, my Dtr-in-law is restless and wants her own place again.  The selling value of the home has gone down in the slump  $660 to $575.  How would I do a buy out of their shares.  Equal half, or the amount that put into it plus a percentage of equity.  I don't know how to express it.  I would want it to be equitable to all concerned as there are no hard feelings.

Answer
Hello Carol - My answer will initially anticipate that all repairs and original investments (down payment and closing costs were split 50/50 and both parties are on the mortgage loan). If not, this will complicate the 'fairness' to buying out their interest and we can discuss this later. The next question is to determine what the equity is. You need to look at the equity as though you were selling the home to someone else (not staying in it). Current value $575,000 - mortgage loan(s)= Equity - closing costs (8%) $45,000 estimate (incl 6% real estate fees) = Net Proceeds (if this is a negative number then they would owe you to 'buy out' of their debt interest in this property)... But for the sake of this answer we will imagine this number is a positive number. Therefore, this amount would be the cash position in the property if it were sold to another party (Fair). This means that if each paid 50% of the mortgage loan payments, 50% of the down payment, 50% of any repairs/maintenance, you should be able to split the Net Proceeds 50/50%. So to be 'fair' all you would do is provide them with the amount of cash equal to the 50% amount. Now since you desire to remain in the home you might need to refinance the house to get that money, AND need to talk to the bank to ASSUME the mortgage loan in just your name(s) and remove your son and d-i-l from the mortgage loan. If they are not on the loan then this will simplify this a little... as you will not need to talk to the bank to assume the loan in just your name, and, if you have the liquid cash you could just write them a check for 50% of the Net Proceeds. This would be fair. In addition, if as stated in the beginning the orig. settlement fees, mortgage payments, and maintenance were not split 50/50% then the party paying those fees should be able to recover their investment from the Net Proceeds FIRST, then the remainder would be split 50/50%. This is not complicated although answering your request is complicated without all the information, so I am attempting to provide you with all the information in an appropriate clear and concise manner. the only remaining issue would be the Deed to the property (Owners of Record). You should trade the 50% money for a quit claim deed signed by your son and d-i-l removing their interest and ownership in the property. Usually an escrow company or attorney can prepare one for you depending on the state you live in. If you feel this is too much for you to handle then I recommend consulting a real estate attorney to handle this for you. But this IS the process and the result will be as you requested 'fair and equitable to all parties'. I hope this helped. This is not to be construed as legal advice as I am not an attorney, rather this is real estate advice that any professional REALTOR should be bale to provide. If you need any further information please don't hesitate to reply.- Todd

Buying or Selling a Home

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Todd C. Menard

Expertise

National Association of Realtors Code of Ethics and Professional Standards * Contract Questions: 05/05 Arizona Real Estate Purchase Contract, Exclusive Buyer Broker Contracts, Listing Contracts and associated contract documentation as it relates to boilerplate, covenants, contingencies, procedures and procedures. * ARMLS Arizona Regional Multiple Listing questions * Real Estate Professional Standards and Practices, Ethics, Obligations, Duties * Agency relationships in Arizona, Procurring Cause * Questions typicaly arising during the listing period * Questions typically arising during the escrow period * Questions about working with a real estate agent/REALTOR * Questions Related to New Home Builders

Experience

National Association of REALTORS Board of Director (2011) Arizona Real Estate Salesperson License (1991-1995), Arizona Real Estate Brokers License (1995-Present), Arizona Association of REALTORS Board of Directors (2008-Present), Arizona Association of REALTORS Professional Standards Committee (2008-Present), AAR Certified NAR Code of Ethics and Professional Standards Instructor, Southeast Valley Regional Association of REALTORS President-Elect (2011) Southeast Valley Regional Association of REALTORS Board of Directors (2008, 2009), Southeast Valley Regional Association of REALTORS Grievance Committee Chairperson (1998-2007), Southeast Valley Regional Association of REALTORS Bylaws Committee (2008-Present), Southeast Valley Regional Association of REALTORS Education Committee (2008), Arizona Association of REALTORS Forms Committee - Residential Purchase Contract (2005), Arizona Association of REALTORS Forms Committee - Residential Rental Agreement (2008), Arizona Association of REALTORS Forms Committee - Buyer Broker Agreement (2009), Arizona Association of REALTORS Presidents Advisory Group, Road to Professionalism (2009), Arizona Association of REALTORS GRI Curriculum Review Committee (2009), Arizona Department of Real Estate, Commissioner's Education Advisory Group Sub-Panel B (2010) Arizona Department of Real Estate, Commissioner's Statute and License Review Committee (2007)

Organizations
National Association of REALTORS, Arizona Association of REALTORS, Arizona Real Estate Educators Association (AZREEA), Arizona Regional Multiple Listing System (ARMLS), American Notary Association, Southeast Valley Regional Association of REALTORS (SEVRAR), Southeast Valley Regional Association of REALTORS Women's Council of REALTORS (2010-Present), Phoenix Association of REALTORS (1994-2000, 2005-2009), Scottsdale Association of REALTORS (1994-2000, 2005-2009), Maricopa/Glendale Association of REALTORS (1994-2000, 2005-2009),

Publications
"Real Estate in 2008"- Lifebushido Publishing (Contributory Author), SEVRAR Magazine, Internet Crusade, RealTown ListServe, Blogger.com, Active Rain

Education/Credentials
- AAR Certified Ethics and Professional Standards Instructor, Graduate REALTOR Institute (1993), Certified Negotiation Expert (CNE), Over 100 Hours of annual real estate continuing education, Annual Ethics and Professional Standards Development Workshops as required by the National Association of REALTORS, Approx. 36 hours of NAR Code of Ethics training annually, Numerous IDW, Seminars and Train the Trainer programs, Business Management Degree - 1981

Awards and Honors
2009 REALTOR of the Year Award, Southeast Valley Regional Association of REALTORS (10,000+ Members), Double Platinum Production Award ($45,000,000 Sales Volume)- Keller Williams Realty Int'l (2001), Top 15 Sales Production Keller Williams Realty International (2001), Top 5 Sales Producation Keller Williams Realty Southwest Region (2001), Top Recruiter Award - Keller Williams Realty Int'l, SW Region (2002), Who's Who in U.S. Executive (1983), Who's Who in U.S. Real Estate Professionals (2007)

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