Legal Question in Real Estate Law in California
I am a 1/4 owner in a rental property with my siblings. We are discussing having them buyout my share. We split the initial down payment equally and got a mortgage to cover the rest of the purchase price. We have paid about 25% of the principle of the mortgage. To determine the value of my share, my siblings have proposed that we would:
1. Determine the value of the house today
2. subtract how much is still owed on the mortgage to get the equity in the house.
3. divide the equity by the 4 owners and pay me that amount
Is that the right way to determine the fair market value of my portion of the house?
2 Answers from Attorneys
If the property has not required any investment (sometimes called "feeding" the rental) since you bought it, then that is exactly the right way to go about it.
A deal like that would be eminently fair, in view of the fact that you cannot force them to buy you out, and there is no realistic market for 1/4 interests in small income properties. The only reason for not accepting the offer (if made) on these terms is that continuing to receive your share of the net rental income is a more attractive financial prospect than being cashed out.
You would stand no realistic chance of coming out better by pursuing a partition action in today's economy, plus you'd alienate your siblings.
If a deal is done, there should be some clarity on what happens to your obligation on the mortgage after you no longer are an owner. Your group may not want to, or be able to, refinance to take you off the note. If so, be sure to get the three remaining owners to agree to assume responsibility for your obligations, by some kind of hold-harmless or indemnity provision.
Related Questions & Answers
Looking for something else?
10,200 active attorneys ready to answer your legal questions today.
Featured Attorneys
Earn additional revenue and grow your business.
