Ex-friend out, new co-owner in

Sun Sentinel Broward Edition - Homespot - Broward East - - CONDO & H.O.A. LAW - By Ilyce Glink and Sa­muel J. Tamkin

Tri­bune Con­tent Agency Q: I co- own

a condo with an ex-friend and would like to buy out his share. I can­not af­ford to be the sole owner, but I have found an­other per­son to co-own the same condo with me. What is the process in buy­ing out the first co-owner for the prospec­tive new co-owner with­out get­ting a real es­tate agent in­volved? A:

You’re right: You prob­a­bly don’t need a real es­tate bro­ker to han­dle your is­sue. But you will need ei­ther a real es­tate at­tor­ney, ti­tle com­pany or set­tle­ment agent to han­dle the trans­ac­tion. In essence, you’re go­ing to need your ex-friend to sell his in­ter­est in the con­do­minium to this new per­son who will coown the property with you.

Keep in mind that your ex-friend is sell­ing his in­ter­est, and that sale will be sim­i­lar to a sale of the whole con­do­minium. If your new co-owner is buy­ing out your ex-friend us­ing cash and will not need a lender, your pa­per­work will be less. But, your ex-friend will have to con­vey his in­ter­est to your new co-owner by deed and you’ll likely need a set­tle­ment agent to han­dle the trans­ac­tion.

There are lim­ited sit­u­a­tions in which you can avoid us­ing a set­tle­ment agent and ob­tain­ing ti­tle in­sur­ance, but you have to be pretty savvy and knowl­edge­able in real es­tate to do it that way. There are pit­falls and risks in buy­ing real es­tate, and even though you’ve owned the property with your ex-friend and as­sume that you know the sta­tus of your property, your new co-own- er might be in­cur­ring risks in ac­cept­ing doc­u­men­ta­tion from your ex-friend with­out do­ing his own due dili­gence or by work­ing through a ti­tle com­pany.

For ex­am­ple, if your ex-friend has tax prob­lems with the IRS, those tax prob­lems could be­come your new co-owner’s prob­lems. For this rea­son, if you live in a place where real es­tate at­tor­neys are cus­tom­ar­ily used in res­i­den­tial trans­ac­tions, you should hire one to help you out. If you live in a place where you don’t usu­ally use real es­tate at­tor­neys, you can ei­ther try to find one or hire a good set­tle­ment agent and your new co-owner should get ti­tle in­sur­ance on his pur­chase of his in­ter­est in the con­do­minium.

Lastly, if you and your ex-friend had a mort­gage loan on the property, you might have to han­dle the whole trans­ac­tion through a re­fi­nanc­ing. At the time you re­fi­nance the loan, your ex-friend would trans­fer his own­er­ship in­ter­est to your new co-owner and you and the co-owner would take out a new loan on the con­do­minium. If you don’t do it this way and you have a loan on the property, we don’t see why your exfriend would want to sell his share of the con­do­minium with­out be­ing re­leased from the loan obli­ga­tion that he and you signed.

If your ex-friend sells his share of the con­do­minium with­out be­ing re­leased from the loan obli­ga­tions, he could find him­self hav­ing his credit dam­aged if a loan pay­ment is not made on time or, worse, if you stop making the loan pay­ments all to­gether. For this rea­son and for a cleaner break with your ex-friend, you’d want the con­domin- ium own­er­ship to match any loan obli­ga­tions. That means if you have an old loan, you should pay that off and take out a new one.

Please con­sult with an at­tor­ney to help you bet­ter understand the sit­u­a­tion and choices you have.

Ilyce Glink is the cre­ator of an 18-part we­bi­nar and ebook se­ries called “The In­ten­tional In­vestor: How to be wildly suc­cess­ful in real es­tate,” as well as the au­thor of many books on real es­tate. She also of­fers in­for­ma­tion on her YouTube chan­nel. (youtube.com/ user/Ex­pertRealEs­tateTips).

Con­tact Ilyce and Sam through her web­site, ThinkGlink.com.

© 2015 Ilyce R. Glink and Sa­muel J. Tamkin. Dis­trib­uted by Tri­bune Con­tent Agency, LLC.

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