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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: petey2233 on June 20, 2013, 07:03:53 PM

Title: Logistics of SFR buy out of co-owners
Post by: petey2233 on June 20, 2013, 07:03:53 PM

I own 50% of a house, and have 2 sibling co-owners who each own 25%.  Current mortgage: $78,000.  Current value: $600,000.  The 2 sibling co-owners inherited their portion 10 years ago. I co-owned with now-deceased parent prior to that. (There were other properties involved, which is why the split ended up the way it is).

Here's my question to you who are brighter than I: If I want to buy out my siblings (they are agreeable) without refinancing (they would carry), are they responsible for paying off their "ownership" of the existing mortgage?  I assume since they inherited their portion of the equity, they inherited their portion of the mortgage debt.

Or do I just have to own the debt, and pay them just what is their equity?

Thanks a million.

Peter

Title: Re: Logistics of SFR buy out of co-owners
Post by: honobob on June 21, 2013, 08:37:31 AM

$600,000-$78,000=Equity $522,000 X 25%=$130,500 each.   You could argue that they would have selling expenses to get their $130,500 equity.  They could argue that the house would get more on the open market.  I'd cash out their equity.

Title: Re: Logistics of SFR buy out of co-owners
Post by: SwordGuy on June 21, 2013, 09:49:43 AM

Whomever signed on the loans with the bank owes the money to the bank.

Nothing you agree among yourselves matters.

Do not enter into an arrangement where you give them money and they agree to pay off their share of the debt.  THey might not do it and the bank will still make you pay.

Title: Re: Logistics of SFR buy out of co-owners
Post by: honobob on June 21, 2013, 10:42:35 AM

And what would be their share of tbe debt?

Title: Re: Logistics of SFR buy out of co-owners
Post by: petey2233 on June 21, 2013, 01:26:12 PM

The siblings' share of the debt would be 50% of $78,000, which is $39,000.  I'm assuming they would need to pay off their portion of the mortgage in order to be paid their equity.  That is my fundamental question.  Thanks

Title: Re: Logistics of SFR buy out of co-owners
Post by: arebelspy on June 21, 2013, 01:50:40 PM

Quote from: petey2233 on June 21, 2013, 01:26:12 PM

The siblings' share of the debt would be 50% of $78,000, which is $39,000.  I'm assuming they would need to pay off their portion of the mortgage in order to be paid their equity.  That is my fundamental question.  Thanks

I'm guessing there is a miscommunication on what equity is.  It is not what the property is worth.

Equity is market value minus debt.  Bob subtracted the debt to arrive at the equity.

Whether you pay it off or not is academic.

Naturally you calculate the part that they own as the value minus what is owed.