What is a Fair Price to Buy Out Brother’s Interest in House?
Photo by Abby Rurenko on Unsplash
Question:
My two brothers purchased a home together in 1990. Both lived there and shared the costs of the home. One brother got married in 2000 and stayed in the home with his wife while the other moved out. The married couple assumed the costs of the home from 2000 on. It is now 2024 and the brother that moved out would like to be bought out of his share of the house. How would the value of his share be calculated considering the appreciation of the house increasing since 2000 and his not making any contribution to the costs of the home since 2000?
Response:
Absent an agreement between the brothers, there’s no correct answer to this question. But I think the brother who moved out has a strong argument that he’s entitled to the current fair market value of his one-half interest in the house. One can argue that the fact that the other brother and his wife maintained the house and paid all its expenses was simply their payment for its exclusive use.
But I don’t know what the other brother and his wife actually paid in maintenance costs and whether they improved the property through spending or actual work they did on the house and the land around it — so-called “sweat equity.” For instance, if they paid to renovate the kitchen or replace the roof and the brother who did not live in the house did not contribute, perhaps there should be an offset for half of their out-of-pocket costs.
I addition, there should probably be a small discount off the fair market value because a real estate agent will not be involved, eliminating the cost of the broker’s fee.
In the end, each brother should say what they believe is fair and they should compromise somewhere between the two numbers.
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