How to Buy Out a Sibling's Share of Real Estate

Quitclaim deeds are often used to convey property between family members.

Quitclaim deeds are often used to convey property between family members.

If you and your sibling inherit or buy real estate together, you two may eventually mutually agree that you will buy your sibling out. If it's an inheritance, your sibling's share, or percentage of ownership, of inherited property is determined in the will, if there is one. Otherwise, the share is determined by the law of the state where the real estate is located. Her share of real estate that you two purchased together corresponds to how much of the purchase price she contributed, and whether she invested any additional money into the property.

Determine how much of the property your sibling owns. With inherited property, the will tells you, if there is a will. If not, the portions both you and your sibling inherit are determined by the law of the state where the property is located. A probate attorney or the estate personal representative can explain the statutory distribution of property as it applies to you. If you've already received your shares of the property through a completed probate, you already know how much of the total each of you owns. For property you purchased together, the percentage your sibling owns corresponds to the percentage of the total purchase price she paid. For example, if she contributed half, or 50 percent, of the initial purchase price, she owns half, or 50 percent, of the property.

Calculate how much your sibling's share is worth. Again, if you've already received your shares of the property through a completed probate, you already know how much your shares are worth. The probate process requires any real estate be appraised, and this appraised value stands as the total value of the property. if you don't already know the value of your sibling's share, calculate the value as a percentage of the total value. For example, if each of you inherited half the property, which means you both inherited a 50 percent interest in the property, the value of each share is the total appraised value divided by two.

Adjust for appreciation in value and additional investment. If you've owned the property for any length of time, it has likely appreciated in value. Additionally, if either of you has invested additional money to improve the property, these improvements have increased the property's value. Have the property appraised. Calculate total equity by subtracting the current balance of the mortgage from the appraised value. Calculate total profit by adding the total investment in the property made by both siblings and subtracting that number from the total equity. Calculate one sibling's individual profit from the property by multiplying total profit by the percentage of the sibling's initial purchase investment. For example, if the sibling contributed 50 percent of the initial purchase price, the percentage for the profit calculation is 50 percent. Repeat the calculation for the other sibling using the second sibling's percentage contribution -- in our example, also 50 percent. Finally, calculate one sibling's equity in the property by adding her initial purchase contribution, the amount of any subsequent investment in the property, and her individual profit amount. Repeat the calculation for the other sibling. This final number is the value of each sibling's share of the property.

Obtain a quitclaim deed. Form deeds are available for free from various websites, office supply stores and often from your court clerk's website or office. Fill out the form. Requirements vary by state, but generally you must provide identification and contact information for both your sibling as seller and yourself as buyer. Set out the address and legal description of the property, and state that the deed transfers, or conveys, the total interest in the property owned by the seller.

Have your sibling sign the quitclaim deed before a notary. Depending on your state's requirements, you may also have to sign the deed, and it may also need to be witnessed by one or two witnesses. Have the deed notarized. Pay your sibling the amount calculated as the value of her share of the property and take the deed.

File the quitclaim deed with your county recorder's office where deeds and other official documents are filed in the public record. The deed is valid without filing, but questions about the validity of ownership may arise later if the deed is not made public record. You may also have trouble selling the property later if there appear to be any gaps in ownership, otherwise known as the property's chain of title.

Tip

  • If you don't have enough cash on hand to purchase your sibling's share outright, you may decide to draft a sales agreement in which you commit to make payments over a specific period of time. Alternatively, you may reserve the right to purchase your sibling's share for a specific period of time contingent upon obtaining financing. If you successfully secure financing, the sale proceeds as planned. If you fail to obtain financing before the deadline, the sales agreement expires, and your sibling is free to sell her share to someone else.
 

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