Is it possible to sell half-ownership in a house?

March 29, 2022 11:40 AM

For example, if a brother and sister inherit a house, one of them moves in, can the other one sell their 50% ownership of the property (to a 3rd party) without forcing their sibling to move out? Is this essentially impossible because no 3rd party would want such an arrangement?

There seem to be all kinds of mortgage-like services, but I haven't yet seen any that actually want to change the ownership on a title. Services like Haus, Noah, etc don't seem to take ownership? Are there any that do?

posted by mhh5 to Home & Garden (13 answers total)

You could do it for cash, if anyone were interested (unlikely if the other sibling is living there). Because paying off a lien would effectively require selling the whole house, which would be impossible without the consent of both parties, it seems unlikely that a bank would offer a mortgage to do so.
posted by praemunire at 11:44 AM on March 29, 2022

Best answer: I think you should google "joint tenancy" vs. "tenancy in common". You're talking about a tenancy in common situation...and it IS legal for a person to sell their interest in the property, at least in Ontario:

Tenants-in-common are not forced to remain co-owners indefinitely. Every tenant-in-common has the right to force the partition and sale of their interest in the property for its ‘fair market value’.

This is an equitable right, and hence will be affected by issues of fairness among the co-owners.

As a general rule, sales should be at fair market value to arms-length third parties, and a co-owner –

does have the right to bid on the property;
does NOT have a right of first refusal to purchase the property;
cannot force a private sale of the property to themselves or a related party; and,
does NOT have an option to match the highest bid (as the existence of such an option would suppress interest from third parties).
posted by If only I had a penguin... at 11:51 AM on March 29, 2022 [12 favorites]

Best answer: My family did this, in this order:

- mom and brother owned 50% each (no mortgage)
- they moved out and got a renter (someone my brother knows a little, not a total stranger)
- they told renter they planned to sell at an indeterminate date in the future
- renter said he wanted to buy it
- mom and brother disagreed about how long they each wanted to wait before selling
- renter agreed to buy out my mom first (like she wants), and my brother in at least 8 years (like he wants), allowing the renter to come up with the money in two stages (like he wants)
- sale of my mom's share just went through
posted by Beardman at 11:51 AM on March 29, 2022 [9 favorites]

This is going to vary by state. If you really need to know, you should contact a real estate attorney.

I had a huge mess with jointly owned property, and part of the mess was that the other side's lawyers didn't seem to understand that the state the property was in had different laws that did not allow them to force me to sell.
posted by FencingGal at 12:12 PM on March 29, 2022 [1 favorite]

Please get a real estate attorney who can advise you properly on this, as this gets into various residency and ownership laws that varies from state to state.
posted by kschang at 12:24 PM on March 29, 2022 [2 favorites]

I did this in NY State. This was a specific situation in which two families wished to share a house. In our case it was understood that the half-owners would each use the house at scheduled times and that both families would not usually be present at the same time. I don't remember whether a mortgage was involved. If there were a mortgage, we probably would have refinanced it jointly.
posted by JimN2TAW at 12:38 PM on March 29, 2022 [1 favorite]

Response by poster: I'm hearing that it *is* possible, but it's not exactly a common thing to do without lawyers and accountants advising. I was hoping with all the hype around co-ownership and weird new mortgage services that rely on some kind of fractional ownership, that there might be a decent company out there that handled co-ownership well. But I get that the liability is the part that no company wants, especially if it has to do co-ownership "at scale" of any kind.
posted by mhh5 at 1:14 PM on March 29, 2022

Selling your 50% share of the house is a matter of ownership, but I think the situation with the occupying sibling would be a separate question about tenancy/eviction.
posted by yeahlikethat at 1:19 PM on March 29, 2022

IAAL, IANYL, TINLA.

There are a couple of enormous problems with these types of transactions generally (not, however, talking specifically about a fractional mortgage service, as that would likely add complexities to this situation), that I wanted to alert you to, to keep an eye on:

First, is the matter of partition. As noted above, no stranger really wants to own a fraction of property without the right to use it, thus the amount of purchase is likely discounted. However, barring an agreement otherwise (in many areas), any owner may move for partition of the Property, i.e., sale of the property and division of the proceeds pro rata. Typically, it is assumed when family or friends do this, that all will act honorably during ownership. Transferring to a third party removes this restraint. So contracts must be clear to restrict doing these sorts of things. If the property is "the family home" or houses a parent or disabled sibling or someone else who should be "protected", then introducing third parties into the situation can truly destabilize the thing that is supposed to be stable.

Second, the sale (or transfer) of any portion of the title is almost certainly a violation of any mortgage already existing on the property. The overwhelming majority of mortgages (or deeds of trust or other liens) have a Due on Sale clause, which states that if you transfer the property, you must immediately pay the outstanding balance of the mortgage. Essentially, the bank went into business with the current owners, not one owner and a nameless stranger who they didn't vet. So if the mortgage holder becomes aware of the transfer, they have the right to ask for immediate payment.

Just things to keep in mind while you are considering your next move.
posted by China Grover at 1:59 PM on March 29, 2022 [3 favorites]

Best answer: Some of these details may differ by jurisdiction, but this article suggests that the brother and sister each own an undivided interest in the house. The resident sibling could buy out the nonresident sibling's interest in the house, and this is what is usually done when one co-owner desires to occupy the house while the other does not. Theoretically it may be possible for the nonresident sibling to sell a 50% interest in the house to a third party while the resident sibling retains a 50% interest and continues to enjoy 100% of the benefits of ownership as the sole resident. But who would the resident sibling find that was willing to enter into that transaction? Why would someone want to buy 50% of a property when they get 0% of the use and other benefits of ownership? Would the resident sibling pay some sort of rental to a new nonresident co-owner? Could the new co-owner move in and share the house with the resident sibling? It seems to me that the value of the house would be greatly reduced in this situation, so the nonresident sibling's 50% interest may not be worth anywhere near the money it would be worth if 100% of the house was sold to a single owner and the siblings split the proceeds. Assuming that (a) the house is unencumbered and (b) the resident sibling can't afford to buy out the nonresident sibling's 50% interest in cash, the only way I see this working realistically would be for the resident sibling to take out a mortgage in an amount sufficient to purchase the nonresident sibling's 50% interest.
posted by slkinsey at 2:11 PM on March 29, 2022 [2 favorites]

A lot depends on the value and type of property.

I have seen these arrangements where an investor is happy to tie up some of their money on the basis of the increase in value of the property and receiving a rent payment for their share of the property, but it only has gone well when the sale finalisation process has been defined from the outset, ie. how long; third party sale vs option exercise, etc
posted by Barbara Spitzer at 3:04 PM on March 29, 2022

I'm hearing that it *is* possible, but it's not exactly a common thing to do without lawyers and accountants advising.

Yes, it is possible in many jurisdictions. However, it is difficult to see what is in it for the buyer, unless they can get rent for the property, live in it or force the sale at some point in the future. There's also the challenge of any existing mortgages or other liens on the property. Dealing with any of those would need legal advice relevant to that specific jurisdiction. So, it would not be sensible to do this without a good lawyer.
posted by plonkee at 3:33 PM on March 29, 2022

Selling your 50% share of the house is a matter of ownership, but I think the situation with the occupying sibling would be a separate question about tenancy/eviction.

I own a home with my sibling that we jointly inherited, in Massachusetts, in the US. No mortgage. We had a conversation about each of our wills and made sure that the way we took ownership of the property as joint tenants meaning we both own it and if she dies it becomes mine. The other option was that we each own 50% and could do whatever with it. These are legal issues that have to do with ownership.

However, dealing with someone living there, especially a partial owner, makes it complicated. Me and my sister are siblings and I'll be honest, a lot of this works because we are friends. She could fuck the place up and we'd both be on the hook for it (or I could, I guess). I spend significantly more time there and she mostly doesn't care. We split the property tax credit (or whatever it is, I have a tax guy) because we own it together. I'm sure there are people who would maybe be interested in half ownership as an investment in a hot area, but having someone living in 100% of the place (and not, say, be working towards turning a place into a condo with two units) would be a risk compared to just buying into a duplex or something else similar.
posted by jessamyn at 5:46 PM on March 29, 2022 [1 favorite]