I own a condo with a friend and I am going to buy him out. W

mwnowak · Joined: 11 Mar 2008 Posts: 2 1.56 Dollars($)

I own a condo with a friend and I am going to buy his share. My mortgage broker said all we need to do is have him sign a quit claim and then I can refinance the mortgage in my name. I would then give him a check for his share. This way we avoid transfer stamps, formal closing, title insurance, etc. His lawyer said we need to go through the formal sale. Any help would be appreciated.

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi mwnowak,

Welcome to the forum.

I think your broker has given you a good suggestion. But is your friend agrees to quitclaim his share of the condo to you. I think just get the appraisal value of the condo and then pay him for his share of the condo and request him to quitclaim to you. Then you can refinance the mortgage to you.

Feel free to ask if you have any further questions.

Best of luck,
Larry

adonis · Posted: Wed Mar 12, 2008 1:04 am Post subject:

well, your broker has given the right advice. May be his lawyer wants a normal sale so that he can get maximum proceeds. I think you should talk to the lender, he must be having a say in this transaction as he has an interest in the property. But before you refinance, have a look at the probable faqs on refinance to get an idea of what you're going for.

jbarto65 · Joined: 04 Nov 2007 Posts: 626 -0.11 Dollars($)

quit claim should be okay in this situation, you would just have to refinance the condo to a loan that is just in your name. I agree with the above poster that the attorney wants to make a buck too.

mwnowak · Joined: 11 Mar 2008 Posts: 2 1.56 Dollars($)

How does this affect him for the profit he makes? Does he report it? Do I then inherit his basis on the place, therefore passing along the tax liability to me when I sell? Thanks for all your help.

mike

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi mike,

Welcome back.

If he gains money as you are buying him out, he will have to pay capital gain tax. He is not transferring his tax liability to you. As you will be the only owner of the property after the quitclaim, you will have to pay the property tax. And whenever you sell the house if you gain any money from the sail you will have to pay capital gain tax.

To know more about this issue you may also check out the discussions on Capital gains tax and Exemption from capital gains tax.

Feel free to ask if you have any further questions.

Best of luck,
Larry

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