Buying out an inheritance occurs when multiple people inherit a property from an estate. It generally happens with siblings, but anyone named in a will can become joint owners of an estate with an equal share. The situation arises when one person wants to keep the property and the others want to sell. This can be a tricky issue that is difficult to navigate without legal advice if they can’t come to agreeable terms.
What Happens When You inherited a House with a Sibling?
If your parents or another relative left you and your siblings a house together in their will, you have several options on what to do with the property. In most cases, you will have an equal share unless stated otherwise in the will.
One option is to keep the home and everyone can enjoy it equally. Perhaps you decide to make it your vacation home and share it with your families. Since you have joint ownership, you have equal rights to spend time there and equal equity in the real estate property.
Another option is to either sell or rent the house out if neither you nor your sibling want to keep the property. You would need to determine how to divide the rent if one takes care of more of the upkeep and other tasks as landlord. If you decide to sell, you would split the profits after selling at fair market value.
In some situations, the siblings can’t agree on what they want to do. One wants to keep the property and the other wants to sell. In these situations, you may need to take your case to court and let the judge order the sale of the home. A third party would be responsible for getting the property ready to sell, which will reduce your profits because their payment would come out of the amount paid.
How Do You Buy Someone Out of an Inherited House?
If you and your sibling can agree on one of you keeping the house and the other selling, the process can be quite simple. You can pay your sibling cash for their share of the real estate property and they will sign the deed over to you. You could also get a mortgage but only for half the value if you are willing to take on the debt. You would need to pay closing costs, and you may need an appraisal to determine the value of the home.
If you can’t get a mortgage, you could set up a private arrangement with your sibling. In the contract, you would spell out how much you would be paying for the other half of the property and the interest rate. You would determine monthly payments and how long until the house is paid off. You would want to have all this done in writing to avoid problems in the future. You would also record a deed of trust to recognize the arrangement. It also gives the other person the ability to foreclose if you fail to make the payments. This is an ideal situation if the other person is most interested in receiving regular income and not being saddled with real estate they don’t want.
How Do I Refinance an Inherited Property to Buy Out Heirs?
If you want to keep a property and your siblings want to sell it, you will need to come up with the necessary cash to complete the transaction for your share. In most cases, traditional lenders, such as a bank, won’t provide a loan for a property in an estate or trust with other owners. Your best option is to find a hard money lender. These loans are also known as probate loans, inheritance loans, and trust loans. They are different terms that all mean the same thing.
The way this type of loan works is that the lender pays the money directly to the estate, which will then go to the heirs who are selling their part of the house. The heir who wants to keep the house will assume the loan and pay the lender. Interest rates are usually higher than with a bank, but you are usually able to get approval quickly so you can move forward with the buyout. You will need to bring some cash to the table because most probate loans are only for as much as 70 percent of the value of the property. The lender will review your application and determine how much percentage of funds to provide and the terms for the loan.
After the refinancing is complete, the title of the property will go to the one heir who is buying the rest of the property from their siblings. They have the option of getting a refinance loan from a bank for a lower interest rate.
Can Siblings Force the Sale of Inherited Real Estate?
If you want to keep the house and your siblings want to sell it, you may wonder if you have any rights with your part of equity in the property. You may be forced to sell if you can’t come to a compromise because one of the siblings could file an action with the court which will require the property to be sold and the proceeds split between the heirs.
When this happens, the house will be listed for sale. It may go through a public auction or it could be listed as a regular real estate listing. If this situation occurs, you could bid on the property or make an offer. Once your offer is accepted or you become the highest bidder, you could purchase the property.
Generally, if real estate is involved in an estate, you will need to go through probate court. The exact requirements differ, depending on the state. If you own the property jointly with one or more siblings, you will need to reach an agreement or the court will force the sale. However, there are ways you can buy out your siblings’ share of the property if you want to continue to have ownership in the home. Just know that in many cases, you will need to have cash in hand, which may be in the form of a loan.