When you buy a home with someone else, both of you have ownership rights. If the co-owner decides he no longer wants to own the property, you have the option to buy out his share. Aside from determining a fair price, the process is fairly straightforward. Since you already own half of the property you can bypass some of the common home-buying steps, such as an inspection.
Review the Deed
When you and the co-owner purchased the home, the seller signed a deed granting you an ownership stake. The deed determines how you jointly own the property, also called the vesting. There are different types of vesting, including joint tenants and tenants in common. A joint tenancy is often established between married couples. Each owner holds an equal and entire share of the property. With a tenancy in common, owners can hold unequal shares such as 70 percent and 30 percent. Understanding the type of ownership you and the co-owner have is important in determining a fair buyout price.
Reach an Agreement
Before proceeding, you'll need to negotiate the terms of the buyout with the co-owner. The market value of the property can be determined by a licensed appraiser. Depending on your situation, you might decide to simply pay the co-owner half of the value. However, there might be other factors to consider before the final value is reached, such as an outstanding mortgage loan. If the loan is in both of your names you can apply for a refinance loan on your own to remove the co-owner's financial liability to the loan. Once you've reached an agreement, a real estate attorney can help to prepare a sales contract. You and the co-owner can decide how you will pay him. You can use a check if you have the funds, or you might need to take out a loan to come up with the money.
Sign a New Deed
The co-owner must sign a deed granting his ownership rights to you. Since your name is also on the original deed, your signature is likely required as well, though the specific laws in your state may vary. You can obtain a deed template at your local recorder's office, a local office supply store, or through online resources. However, using an attorney ensures that the deed is prepared and executed properly according to the law.
Submit For Recording
After the deed is signed, it should be filed on public record. Although there is no legal requirement to record a deed to make it valid, it's a very important step. If the deed is never recorded, the county will be unaware of the ownership change and therefore send property taxes to you and the co-owner. In the future, chain of title issues may arise as well. If you're using an attorney to conduct the transaction, it's common for him to take care of the recording step as well. If not, you can take the deed to the county clerk's office and fill out any required transfer forms. The county will charge a recording fee, and there might also be transfer taxes assessed. Each county has its own process, so contact your clerk or recorder's office with specific questions.
- Sirkin and Associates: Equity Sharing 101
- Realtor: Ways You Can Hold Title to Real Estate
- Legal Match: Terminating a Joint Tenancy
- Bankrate.com: Understanding Quitclaim, Warranty Deeds On Property
- The Los Angeles Times: Picking the Best Way to Hold Title to Your Home
- Nolo: Deeds FAQ
- FHA.com: FHA Streamline Refinancing Rules for Adding/Removing Borrowers
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