Buying out a home

[Shaun @ Tru6]

My brother and his wife own their home in Kansas. They will unfortunately be entering into divorce proceedings soon. His wife wants to keep the home. What's the best way for her to buy his half of the home?

[LWJ]

Can they refi now before the big D and take out cash? That seems a simple route. Not sure who should apply for the mortgage, maybe just she does?

[DonDavis]

This can be very challenging.

Without considering all their specifics wrt “their entire financial” profile, the quick and dirty is get an appraisal or have a RE provide comps. Split the value in half, she comes up with the money on her own that goes to him. Then he signs a Quit claim for the deed.

If there’s familial debt, strap in, it’ll get dicey.

If a judge gets involved, they’ll most likely say “no buy out, just sell the property”.

Full disclosure, I stayed in a Holiday Express about a year ago.

[Dantilla]

If they own the home free and clear, and she can qualify for a 50% LTV mortgage, he signs a quit-claim deed and takes the cash. Done.

If there is currently a mortgage, same, except she needs to qualify for a larger loan to cover the outstanding amount, plus 1/2 the equity.
He signs a quit-claim deed and has a check for his half the equity.

If she cannot quilify for a loan on her own, the house may have to be sold.

[Dixie]

Originally Posted by Shaun @ Tru6

My brother and his wife own their home in Kansas. They will unfortunately be entering into divorce proceedings soon. His wife wants to keep the home. What's the best way for her to buy his half of the home?

This is how I did it in each of my divorces. Each person pays for an individual appraisal. The person keeping the house then pays the other 50% of the computed equity. Obviously tweaks can be applied. For example, they could agree to use one appraisal, but they won't trust each other enough to do this.

The fact that you're asking leads me to conclude that at least one of them hasn't consulted a lawyer, and probably should.

[jhynesrockmtn]

My divorce was as friendly as they get, but we each still had our own attorneys. They were trained in mediation. If your brother doesn't have a lawyer, he needs one, even if things are civil. Each situation is so unique. The lawyer will help figure out the particulars of dividing the assets and debt.

[Shaun @ Tru6]

Thank you everyone, this is very helpful.

I told my brother he needs to get an attorney asap. It is an amiable break-up and both are good people.

[3rd_gear_Ted]

Lawyers keeping things civil is a good thing.
Regrets from the selling party if value of the home increases a lot is common.
I bought our family home when we settled our parents estate, the value rise has been awesome, but my SIL's aren't so close anymore.
You don't buy cars from relatives is a street rule, I'm thinking houses are the same

[Shaun @ Tru6]

Originally Posted by 3rd_gear_Ted

Lawyers keeping things civil is a good thing.
Regrets from the selling party if value of the home increases a lot is common.
I bought our family home when we settled our parents estate, the value rise has been awesome, but my SIL's aren't so close anymore.
You don't buy cars from relatives is a street rule, I'm thinking houses are the same

20 years ago, which is a long time, friend's parents passed away, he was here in NY, his brother in CA, it was contentious, he got the house for $200Kish. It's now worth well north of $2 million and I wouldn't blink if it sold for $4M. Brother got cash and a Saab Aero.

[zakthor]

Never been divorced, never even stayed at a holiday in.

But I did listen to this entire thing with my spouse on a long car ride:

https://youtu.be/fUEjCXpOjPY?si=2bIdY1ZXTb26k_bd

We were both super duper impressed.

At it least convinced me that I'd want an attorney.

[MBAtarga]

I'm not going to research to check any of this - but I recall (believe) the important (most?) is to make sure his name is removed from the mortgage if one still remains. Forget about the quit claim deed - etc - as that isn't important if she defaults on the mtg - he is liable.

[Shaun @ Tru6]

Originally Posted by MBAtarga

I'm not going to research to check any of this - but I recall (believe) the important (most?) is to make sure his name is removed from the mortgage if one still remains. Forget about the quit claim deed - etc - as that isn't important if she defaults on the mtg - he is liable.

that makes a lot of sense, thanks Mark.

[Steve Carlton]

Originally Posted by Shaun @ Tru6

20 years ago, which is a long time, friend's parents passed away, he was here in NY, his brother in CA, it was contentious, he got the house for $200Kish. It's now worth well north of $2 million and I wouldn't blink if it sold for $4M. Brother got cash and a Saab Aero.

A house going from $200k to $2-4M in 20 years sounds unbelievable. How much cash did the brother get? That Aero is definitely worth less than $2M.

[Zeke]

Some 45 years ago I gave a 2nd mortgage to my to be ex wife, simple interest with a friendly rate, no payments due, but due on sale, of course. It all worked as I sold the mortgage when I bought another house 4 years later. I more or less gave up my interest earnings but it was enough for the 20% down.

[Icemaster]

Sean - went through your brothers plight a few years ago, also an amicable split. At least as amicable as it can be.

Might be worth checking into something called 'tenants in kind' deed.

We had an agreement where I remained a co-owner of the house, even split, until kids graduated high school. Once that happened she had to buy out my interest based on a value that we both researched, asking some friends in the business to pull some comps. Debt (HELOC) was subtracted from that amount, she had to finance what she would owe me - how was up to her and the house was then hers to do with as she pleased.

To protect both our interests during that period we both signed off on that deed which gave us both equal percentage of the property. Dower rights and a few other factors would have made it a challenge or risky to retain a traditional deed.

YMMV, PM if you want some more info.