Expert: Jessica Bryan - 9/2/2008

Question
Approximately 2 years ago me and my buddy bought a house together.  Both of our names are on the mortgage and for the last 2 years everything has been split exactly 50/50.  Now we are both engaged and heading in different directions.  I am wanting to keep the house and buy out his portion of the mortgage.  What is the best way to figure out how much money I give to him to pay out his half.  I understand that the house needs to be appraised.  Do I add in half of what the Realtor fees would be so that he is basically not getting rid of his half for free?  Do I take the new appraised house price, minus the remaining amount on the mortgage, subtract 50% of what legal fees would be and come up with a number?  I know once a price is agreed on then a lawyer must be consulted regarding changing the names on the land titles etc.  If you got any advice regarding buying out a roommate please let me know!!

Answer
Dear Alistair;
You are absolutely correct in your thinking.  The only thing that I can add to this is that there should be a home inspection with anything that is wrong with the home today repaired so you won't be faced with additional costs that come up in the near future.  Buying out your roommate's half is very much like buying a home by yourself.  It should be done the same way so that you know that what you are buying at that moment is functioning correctly and your costs are clear and understood.  All fees at that point of purchase should be split fifty/fifty.  An attorney can help with the agreement to make sure that everything is clearly defined and titles are transferred legally.  

Good luck and Best wishes.

Jessica Bryan