When a couple owns a house together, how could one buy the other out at under market value?

Question

Two people (Canada) together for about 2 years own a house for 14 months together. Both would like to sell, but one would like to buy the other out. Due to increase in property value in the past 14 months this may not be feasible, although at buy-in price it would have been.

Does anyone know or have any creative ideas on how to buy the other half of the house for lower than market value?

Answer 1

see if the other person would refinance with you get a fixed rate see if it goes lower than what you are paying

Answer 2

The sale can be made at any value that is jointly agreeable. (A way to find a sale price is that each party writes his valuation on a paper and the papers are then compared. The high bidder gets the house -- at the median price.) The problem is not in the sale price -- it is in the financing. If there is a mortgage with a due-on-sale clause, there could be a problem -- when the sale is recorded, the lender might call the loan and demand a re-finance. But that may not be a problem as there is lots of cheap money around nowadays. The buyer could take the house on a contract of sale, or give the seller a note (possibly secured by the house, i.e. a second mortgage) for some portion of the price. I can give more specific advice if you wish to contact me via avatar with details such as the location, original price, current estimated value, mortgage details (if any), and how much the buyer can stand to make in the way of payments.

Answer 3

What you're saying is that the house has appreciated a bunch. That's a good thing. Also, there's no problem in what you propose.

You fill in the real numbers, but for my example, I'm going to use hypothetical ones.

Bought house for $100,000 14 months ago. Let's say the loan was $90,000. Each of you has $5,000 in equity.

Today, the house is worth $140,000. Loan balance after paying for 14 months is actually still almost $90,000. Now, each of you has $25,000 in equity. (140 - 90)/2 = 25

Let's say the two of you decide to sell the house for $140,000. The cost of selling (Realtor fees, closing costs, etc.) let's say will be about $10,000. So you would each walk away with $20,000. That would be fair for each of you to receive the $20,000.

So, if you can give $20,000 to your other half and keep the house, that would be fair. But fair would also entail taking that person off the mortgage, so you need to re-finance into your name only. If you cannot, then I suggest selling the house outright.

The end result is that you have a loan for about $90,000 and also give $20,000 to your other half. You've bought the house for effectively $110,000. That's $30,000 lower than market value.

Answer 4

Property values are based on what the buyer pays and the seller accepts. Period. If they are on good speaking terms any amount they agree on would be fair market value. Even if it's a dollar. The second party would sign off on a Quit Claim Deed, but still be obligated to the mortgage they both signed when it was purchased. If the second party is not agreeable to staying on the mortgage, then the buying party would have to refinance it in his/her name only. Sounds pretty easy to me as long as they both can agree to a settlement. Good Luck!