How To Buy Out Co-Owner Of House

Q: A friend and I bought a house together three years ago. We each own 50 percent of the property and are listed as equal owners on the title.

My friend is now moving out of town, but my boyfriend and I would like to stay in the house for another two years.

The house has risen in value by $75,000 since we bought it. I cannot simply buy her out at the current value of the property because the new mortgage would be beyond my means. But my friend would like to take some of her profit from the house and buy a new car, which she’ll need in her new town.

Is there a good compromise that will give her some money, yet allow me and my boyfriend to keep the house with a reasonable mortgage payment? Any suggestions would be helpful.

A: You can’t blame your friend — you each invested in a property, which has risen in value by $75,000. She wants her $37,500 and you want to continue to stay in the property. Now, it’s time for you and your friend to have a heart-to-heart about this property and what should be done with it over the next couple of years.

There are a lot of issues that need to be discussed. Let’s say you take out a home equity loan to give her some of her equity, and over the next two years, the house appreciates another $75,000 in value. Will you then sell and give your friend her $75,000 (minus what she has already received)? Will she continue to make half the mortgage and tax payments and help pay for any repairs needed over the next couple of years?

Or, will you insist that because you’ve lived in the house and taken care of it, you’re entitled to all the money.

You can see that unless you sell today or completely buy out your friend, these are going to be significant issues that could ultimately derail your friendship. You and your friend should talk together and then hire a real estate attorney to help you sort out these issues and write up a partnership agreement that spells out each of your responsibilities to the property.

Finally, if you and your boyfriend can’t afford to buy out your friend, I think you should move. Take the profits (which would be tax free since you have lived in the property as your primary residence for the past 2 years) and use that to buy a new property for yourself and your boyfriend.

But before you do, you and your boyfriend need to have a discussion about where your lives are going and what will happen to the property if you break up. Believe me, I get a lot of letters from people who bought property with partners or significant others, and who were left financially devastated because they didn’t discuss these issues ahead of time — and then get the resolutions in writing.


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5 Responses to How To Buy Out Co-Owner Of House

  1. molly says:

    I purchased a home with my sister. We’ve been in the house for 2 years. We got the tax credit for first time buyers. She moved her boyfriend in. And I want to move out. I want her to buy me out but she said she cant afford to. Then I read we have to own the house for 3 years before selling the home or we have to give the money back. Is there a way to take my name off the house and not have to pay the tax money back? THey want me to pay 1/2 of the house and I dont live there. I feel Im going to get the short end of this stick. What can I do.

  2. S. Lii says:

    I am in the same exact position but instead of boyfriend it is my sister’s husband. Our mother passed away two years ago without a Will so the house was probated and left us 50/50 of share of property ownership. We tried to live together,but just couldn’t so last year, I moved out. I would like to buy my own home somewhere, but would definitely like to have my half of the equity to help with that.

    • Colton says:

      I can understand that it didnt work out between the two of you, because YOU are the one that wants to move on and get bought out of the house. You are putting pressure on the other party find money and pay you. Do you think you are entitled to full equity? I’m in same situation, my co-owner wants out so he can buy his own house, first time home owners only a year and half into our first mortgage, there is no equity built up, There is onyl about $10,000 in equity, do you think he is entitled to $5000, i dont think so, I dont have 5000 and if we sell we both lose money on the house. You gotta to take a hit on what you get, or your not going to get it.

  3. wailern says:

    I bought a house in co ownership with an ex girlfriend. The mortgage payments are being deducted from salary which means no payments were made by her since the inception if the mortgage loan. At present I do not where she is living. I want the mortgage bond to be in name only and the title deed to reflect only my name. What do I need to do, please help!

  4. lee ann says:

    My boyfriend and I purchased a house together and in the intrum he had an affair and started to abuse myself and my child with that the court put him out of the house.We then attented court and his lawyer asked that we have an out on court settlement and it would be on my terms and one the terms was that I no longer want to live with him and since he is not living on the premises for the past two years.He also has not contributed to the bond since then.He now stays threating me that he is going to sell the property as he wants his name off.What is the best way that I can resove this as he is also unemployed

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