Home Buyout: How to Start ?

August 24, 2023 9:34 AM

Four years ago a friend and I co-purchased a single family home in Portland, OR. We each have 50/50 ownership. Now, I'm ready to sell my portion and she would like to buy me out. She has been pre-approved for a loan for whenever we decide to move forward. I understand that I will need to get the house appraised to determine its value, but I am having trouble finding specific information about the exact process moving forward. Questions for anyone who is familiar with this type of situation: 1) If you have ever gone through a similar situation, how did you select the appraisal company? Would it be appropriate for me to reach out to our old realtor to ask for a referral? 2) Is it typical to just get one appraisal? 3) After the appraisal is done and the general value is agreed to, do we need to get a lawyer involved? If so, any ideas on how to select a good one? Thank you!
posted by rcraniac to Home & Garden (10 answers total)

A title agency is my first thought for a referral to both an appraiser and a real estate lawyer. Yes, legal consultation is recommended.

Which title agency? The ones that represent First American, Old Republic, TICOR would be best.
posted by yclipse at 9:54 AM on August 24, 2023

If your situation is similar, you might ask the lender you're trying to borrow money from if an appraisal would be needed. In my case, I did not appear to need an appraisal because the mortgage company believed the value of the house was much higher than the amount I was borrowing for the buy-out. I don't know the formula, but in my case it was roughly a five-fold valuation.

I did/do have a lawyer but he was not primarily involved in the transaction. The mortgage company did not release funds until the other party signed the deed over to me, at which point the funds were transferred via escrow to the other person. That signing took place independent of the lawyers.
posted by They sucked his brains out! at 9:55 AM on August 24, 2023

I can't find the Ask that was here a few months ago, but someone else was in this situation and got some good advice, one piece of which was for each person to pick an appraiser and then average the results. Another piece of advice was that each person pick an appraiser and those appraisers agree on a third appraiser, and you both agree to accept that price, whatever it is.
posted by AbelMelveny at 9:56 AM on August 24, 2023 [4 favorites]

I bought a house I was renting about 10 years ago so similar stuff. We got a title attorney who recommended an appraiser. We got one appraisol. We also had it inspected

So ask the realtor for a title attorney and they can help you through the process.
posted by akabobo at 9:57 AM on August 24, 2023

I would start with all the free price info you can get: stick the address into Zillow/Redfin/etc and they will show an estimated value for the house. It could be pretty accurate or wildly off, but should get you in the ballpark. The more recent sales in your neighborhood, the more accurate it will be.

As far as getting an appraiser: the mortgage company holding the pre-approval is going to have opinions on that. If they require one (and they probably do) they will want to pick the appraiser so you won't have to find one.

If they don't require one, then it's up to you the seller and her the buyer to agree on price you are both happy with. Whether that takes zero appraisals or three is entirely up to you. When I did some business with the State of Maryland, they (the buyer) offered to pay for two. I wasn't much interested in negotiation so was fine with that.

As far as finding an appraiser, was there one involved when you first bought? Call them. Calling the title company you closed with previously might be better than calling the old real estate agent because the title company probably wants to close this deal too. A title company should be the only lawyers you need. If your chummy with the real estate agent, then that would be fine too.
posted by Press Butt.on to Check at 10:05 AM on August 24, 2023 [1 favorite]

Two appraisers is more fair if the house is in any way unusual, such that there might not be good comps and therefore the value might be debatable.

When I did this I also made sure to ask the appraisers to give me an estimated selling price, not the guide price for putting it on the market, since these two figures can be quite different.
posted by quacks like a duck at 10:07 AM on August 24, 2023 [4 favorites]

Is this an area where there are lots of home sales? I would head over to Redfin and see what's sold in the last 6 months in your neighborhood. Sometimes there are multiple sales of very similar homes in short periods of time. It would certainly give you a ballpark idea. I would start with two appraisals and do a third only if needed as a tiebreaker. Agree on an amount, like $20K, that if the appraisals differ by that amount or less, you'll just take the average.
posted by wnissen at 10:54 AM on August 24, 2023 [1 favorite]

I'd each get an independent appraisal. I bought a house with no real estate agents, I got an appraisal, it came in low. It's possible the seller was unhappy, but we were neighbors, not really friends. Title agency can do the legal work to transfer ownership, collect and submit any taxes, file a new deed. The title company should have a lawyer, pay for an hour of time, go together, ask questions, get advice.

If I were the friend buying you out, I'd consider getting an inspection, in case of any hidden problem, and I'd want my own appraisal.

Things to talk about; What if the property goes up or down in value a lot? What if after 6 months it turns out to need thousands of dollars of work? Talking about potential problems can guide the way.
posted by theora55 at 11:51 AM on August 24, 2023

My dad was a real estate appraiser.

Given that you're friends and presumably on the same page (i.e. you want a fair price), you will want to talk to the appraiser together. Appraising isn't a hard science, and unless a house identical to yours sold on your block within the last month (or something close to that), there will be a bit of wiggle room in terms of the number the appraiser gives you. If you don't instruct the appraiser, they might assume you want the highest price they feel ethically okay providing you with, which likely may be higher than the likely value the house would sell for.

Would it be appropriate for me to reach out to our old realtor to ask for a referral?

Yes, most of my dad's business came via referrals - realtors will know appraisers they trust, so that's a good way to go.
posted by coffeecat at 12:35 PM on August 24, 2023

I refinanced and bought my now-ex-husband out of my Portland house a few years ago, which sounds like a relatively similar situation. We weren't in a contentious situation and were trying not to spend a ton of money, so we asked our realtor (trusted by both of us) for advice, and he offered to do some kind of evaluation, and we agreed in advance that we'd accept his price as being fair. Then, my mortgage broker worked us through the rest of the process. I think I had to pay for an appraisal as part of the refinance, but that was separate from what we agreed up before all this, with the price.
posted by bluedaisy at 12:58 PM on August 24, 2023 [1 favorite]