Expert: Sue Bernstein - 11/5/2007

Question
QUESTION: My sister and I inherited a house a few years ago.
My sister wants me to buy her out; recently the home was appraised at $375,000.
The mortgage balance is $75,000.
Is it a fair deal if I give her $150,000 for her share and I take over the house and the $75,000 loan?
Or is it more complicated than that?


ANSWER: Dear James,

You can really do whatever the 2 of you deem fair.  What you are considering is very reasonable and it doesn't have to be any more complicated.  If you take the $375,000 and divide by 2 you each have a $187,500 share.  If you then deduct the $75,000 loan that you will inherit you should really only have to give her $112,500 but it is up to the 2 of you.
Hope this helps.

Sue Bernstein
www.SueBernstein.com

---------- FOLLOW-UP ----------

QUESTION: Hi Susan,

I am still not quite understanding this: if we take the $375,000 and divide by 2, then shouldn’t we also divide by 2 the $75,000 loan that we also inherited?
Making each of us responsible for $37,500 of the loan.
It seems that the other way I am making her 100% responsible for the loan; that is my point of confusion.  

Answer
Dear James,

I thought you were buying your sister out.  That would include taking over the loan and turning ownership of the house over to you.  If your sister still wants responsibility for the loan without any  other ownership of the house that is up to the two of you.

Sue Bernstein