Expert: Dick Dennis - 1/8/2010

Question
A buddy of mine and I bought a home roughly 2 years ago and now he wants out.  We were of the agreement that when that took place one would buy the other out or we would sell outright. To say I have limited knowledge on how this process would work would be an understatement.  Could you give a quick layout of how that would work if I bought his half?

Answer
My guess, Andy, is that this guy is listening to someone he shouldn't be. However, the first thing you gotta do is to find out the home's value. You two can pay for a professional appraisal or ask two reputable Realtors for their estimate of value of the home. Use the average price as the value that you agree to pay half of. Or you put it on the market and you guys will split the net proceeds.

But you no doubt have a mortgage on the property which both of you are responsible for. Therefore, you go out and get yourself a refinanced mortgage that will pay off the existing mortgage. The cost of the refinance should be shared by both of you. He gets half the proceeds and you keep the house and the title is put into your name in the process of refinancing.

However, if you guys do not have the best of credit, then chances are you are not going to be able to find a lender who is willing to do the refinance for you in the present market.

But in this market, the value of the house is very probably less than what you guys paid for it. And if you didn't put very much as down payment, you may owe more on your mortgage than what the property is worth. Therefore, your only avenue of escape is to try to sell the house on a short sale. That means you would have to talk to a good local real estate broker and find what should be your first step.
If you do have to do a short sale (when the lender agrees to accept less because the property is worth less and you get not a dime), you should expect to walk away and find a place to rent unless you got a stash of funds hanging around with which to buy another house. It looks to me like the first thing you should do is to find that good local real estate broker and find out what is the best way to accomplish your goal. I wish you well.

Dick Dennis
dixiedee13@aol.com