When a person passes away, they often leave their home to their children. When two or more siblings come into an inheritance in this way, the process can quickly become confusing and emotional. Often, the solution is for one sibling to buy out the remaining shares of the house.
If you find yourself in this situation, you need to make a plan for this transaction. Although there is no way to take emotions entirely out of the equation, a fair and professional process can save your relationship with your sibling and create a sense of peace in the family.
In order to buy out a sibling's share of real estate, you will most likely need to pay them directly and complete a legally binding quitclaim form.
Get an Appraisal
While you may feel tempted just to decide what the house is worth based on your knowledge, it's better to remove yourself from the appraisal process and hire a professional. Doing so ensures that the buyout price is based on the fair market value.
In the spirit of fairness, it's best not to hire an appraiser that either you or your sibling knows personally. Instead, find someone who has the right qualifications and no skin in the game. If you don't know where to look for one, try asking your realtor for recommendations. Before you hire an appraiser, do some research. Look into customer reviews, qualifications and certifications.
If your sibling is not happy with the appraisal, allow for a second opinion. So long as the second appraiser is also neutral, this can help you agree on the actual value of the home.
Decide How Much Their Share is Worth
Once you know how much the property is worth, it's time to determine the value of your sibling's share. In many cases, this will be straightforward. For example, if the home was left to two of you in equal amounts, your sibling's share will be worth half.
However, some wills are not so easy to decipher. If the will states that you get 60 percent and your sibling gets 40 percent of the home, then you will use those numbers as a guide for the value of the sibling's share.
If the will is complicated or the estate is large, you may need to speak with a probate attorney. The lawyer can help you determine the percentage each person owns.
Pay Your Sibling
If you have enough money in the bank to pay your sibling outright, this step is simple enough. However, many people do not have that much easily-accessible cash. You can get a particular mortgage, called an estate loan, that gives your sibling the money they need up front but allows you to make payments.
Alternatively, you can refinance your portion of the home and give the money to your sibling, which is effectively the same. This loan is called a "no-cash-out refinance." You can speak with a trusted financial advisor or mortgage specialist to see what options make the most sense for your situation.
Make It Legally Binding
The purchase isn't over when the money exchanges hands. You and your sibling need to fill out a quitclaim form. You can get this form from your attorney or from any retailer that sells legal forms. Make sure that you describe the home in detail on the form and that you both sign it in front of a notary.
After you have correctly filled the form out, you need to file it with your county clerk. Every county has different guidelines for filing forms like these, so be sure to check with yours about this process.
If You Can't Come to An Agreement
Unfortunately, tensions and disagreements can make this process extremely difficult. If you have tried to work through these steps with your sibling and cannot make it work, it may be time to file a partition lawsuit. This process can be costly and will require an experienced attorney.
- 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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- How to Determine the Value of the Land Vs. the House in a Home Purchase
- Does Co-Signing a Home Loan Require Being on the Title?
- What Is the Difference Between Putting a House in Joint Tenancy and a Trust?
- Debt from Deceased Parents Who Died Without Wills