Expert: Dick Dennis - 1/2/2007

Question
My girlfriend and I bought a condo in FL together for $155K.  We only put 5% down (equally split between us) and we've each paid half of the monthly mortgage.  She is now going to be moving back home and I am looking into buying out her share (we're both on the deed and mortgage together). The one twist is that that housing market went sour and the condo complex is SLOWLY selling new equaivalent units for about $10K less than we paid.  Between the negative appreciation, and very little equity via payment towards principal (only been 9 months of mortgage payments) I'm not sure how much I would need to pay to buy her out.  Would I have to return her 1/2 of the initial 5% downpayment, essentially buying her half of the present "debt" due to the now upsidedown mortgage, or would I not have to return her half of the 5% downpayment since the value of the condo has dropped and we would each lose our downpayments if we jointly sold right now?  I would greatly appreciate any suggestions on how to properly and fairly separate our interests in the condo since she is leaving.  Thank you for your help!

Answer
Since you are upside down and in a downside market, Rob, I do not suggest you buy her half out, not even for a dime. You can give her a second mortgage for an unspecified amount, if you're feeling benevolent. It gets filled in when you do indeed sell the condo some time in the future. I would recommend you consult with a local REAL ESTATE attorney who would put this agreement together. It could be in the form of an agreement instead of an unspecified amount mortgage.

If you ask the attorney about a partition petition, you will see that you are suing to have the property sold and you each walk away with half of whatever is left after costs, if you are able to sell.

I do not think it is fair that she should be able to walk away with $3,875 in cash, jelly beans or anything else. Let her buy you out for that amount. Betcha she won't. You are being too kind. If she wants to walk away, fine. Let her give you a quit-claim deed and you will take care of the taxes, and insurance and mortgage payments, even her half share. She is getting a good deal that way, for sure.

I do wish you well.

Dick Dennis           dixiedee13@aol.com