Posted by Tim Fierro (Tacoma, WA) on February 23, 2002 at 22:46:03:
Just a thought here, but if your friend wants to get the most out of the equity; determine some common deductions from that equity. If the low market value is $375k and they ended up taking 10% less in a bad market; that would bring them down to $337.5k. And if they used an agent who wanted full percentages even at this higher level, say full 6%, then $22.5k for this. Depending on how the market works there, that would be a high profit to the agent as our locals would not gouge a seller this way. But if they did, then now have a total down to; $315k. Assuming about 3% total closing costs of $9k; you have a net dollar coming back to the seller of $306k. The mortgages were $204k and that would leave net profit at about $102k, or $51k each in equity.
Now if this could be explained above, why not get a refinancing of the home to get the extra $51k and pay off the mother; then the mother can keep the cash, or give it to the kids. But it would then be cash.
As I think about it, $17k would actually go to the friend who bought it with his mother so he would only need to refinance to get the $34k needed for the other to brothers.
While first glances look like $70k to $100k equity, there will be expenses to sell and shouldn’t that burden be held on both parties in the ownership? Check local agent fees to determine what the going rate would be. I would do it for $15k, but I do know agents that would try to soak $22k out of it. There are selling fees, tax stamp/excise tax, and escrow fees; you need to account for these when selling. That is if it was an equal participation type partnership. If your friend had agreed to pay for all these fees in advance when they first purchased the house, then he will just have to worry about those later.
Just a thought…