Buying part owner out of house?

Question

Approx 4 years ago, my friend and I bought a house together with the intent to sell within 5 yearsand split the profit. I have decided that I would like to stay in the house and buy him out. We got the house appraised and it the value has increased approx 40%. Can you tell me what other things I need to consider to buy him out - I know I need to deduct 50% of the closing costs from his profit, what else do I need to consider in this transaction.?Thanks

Answer 1

You are buying his ownership of the property at fair market value, and have apparently agreed upon a sale price for that portion of ownership. Any expenses you incur as a buyer (or because you are the buyer) should be totally paid by you.

Any expenses you incur as seller(s) should be evenly split between you. Therefore, title insurance, closing costs, transfer fees and the like should be split. Costs of inspection, loan brokerage fees, and similar should be paid by you.

Answer 2

Is the mortgage in both names? If so, you most likely have an acceleration clause. This allows the lender to request the mortgage to be paid in full because a mortgage holder was removed from title. Also make sure a professional prepares the Quit Claim Deed to remove him from the property. Using the wrong verbiage on the deed can cause major problems later on.