To buy someone out of a house, you pay them for their share of the equity and take their name off both the deed and the mortgage. In practice that means three moves: get a professional appraisal to fix the home’s value, arrange financing (usually a cash-out refinance) to pay the departing co-owner, and sign a buyout agreement along with a quitclaim deed that transfers their ownership interest to you. The mechanics are the same whether you’re separating from an unmarried partner, splitting with a co-investor, or dividing property in a divorce.
Figuring Out What the Buyout Costs
Start with a licensed appraiser. They inspect the property and issue a written opinion of current market value, which becomes the number both sides negotiate from. A single-family appraisal typically runs $300 to $500. If the two of you don’t trust a single report, each side can hire an appraiser and average the results.
Once you have a value, subtract what’s still owed on the mortgage. The remainder is the equity. Split the equity according to each owner’s share, and that’s the buyout payment. If the home appraises at $600,000 with $350,000 owed, there’s $250,000 in equity, and a 50/50 co-owner is entitled to $125,000.
When Ownership Isn’t 50/50
Read the deed before you run the numbers. Some co-ownerships are recorded with unequal shares, often reflecting different down payment contributions. A 60% owner in the example above would be owed $150,000, not $125,000. Any written co-ownership agreement signed at purchase controls here.
Credits for What Each of You Put In
Real co-ownerships rarely track evenly over time. One person may have paid for a kitchen remodel, covered two years of property taxes alone, or carried the mortgage after the other moved out. These contributions can adjust the payout.
The common approach in a negotiated buyout is to credit the contributing owner for the lesser of what they spent or the value the improvements actually added to the home. A $40,000 renovation that lifted the appraised value by $30,000 supports a $30,000 credit. Keep receipts, contractor invoices, bank records, and tax bills. Without documentation, these claims tend to collapse.
Paying for the Buyout
Very few buyouts happen with cash on hand. The financing method you choose affects both what you pay and whether the departing owner is truly off the hook.
Cash-Out Refinance
This is the standard route. You replace the existing joint mortgage with a new, larger loan in your name only. The new loan pays off the old mortgage, and the extra cash goes to the departing co-owner. In one transaction you fund the buyout and remove the other person from the loan.
Under Fannie Mae’s guidelines, at least one borrower must have been on the property’s title for at least six months before closing. The usual requirement that the existing mortgage be at least 12 months old is waived when the refinance is being done to buy out a co-owner under a legal agreement such as a divorce decree or written buyout contract.1Fannie Mae. Cash-Out Refinance Transactions You’ll need to qualify for the new loan on your income alone, which is where many buyouts stall. Closing costs generally run 2% to 5% of the new loan amount.
Assuming the Existing Mortgage
If the current loan carries a low rate, assumption can beat refinancing on cost. FHA-insured loans are assumable, though the assuming borrower has to pass a creditworthiness review and get lender approval.2U.S. Department of Housing and Urban Development. Chapter 7 – Assumptions VA loans are also assumable by veterans and non-veterans, with a funding fee of 0.5% of the remaining balance.3Veterans United Home Loans. VA Loan Assumption – How It Works Conventional loans almost always include a due-on-sale clause that blocks assumption.
Assumption preserves the original rate and term, but it doesn’t produce the cash to pay the departing owner. You’ll need a separate source for that payment: savings, a home equity loan on another property, or another instrument.
Other Sources
Personal savings are the cleanest alternative when refinancing or assumption isn’t available. A home equity line of credit on a different property, a personal loan, or a loan from a retirement account can also work, each with trade-offs. Personal loans carry higher rates and shorter terms than mortgages. Borrowing from a 401(k) reduces retirement savings and can trigger penalties if repayment slips. Price out the full cost of any alternative before committing.
Getting the Other Person Off the Mortgage
This is where buyouts most often go wrong. Signing a deed does not remove someone from the mortgage. A deed transfers title. A mortgage is a separate contract with the lender, and the lender never agreed to release anyone.
If you fall behind on payments after the deed is signed, the lender can still pursue the departing co-owner for the full balance. Any default will hit their credit, and the outstanding loan will count against their debt-to-income ratio when they try to buy their own place. A promise inside the buyout agreement that you’ll make every payment helps in a lawsuit between the two of you. It does nothing to stop the bank.
The only real protection is retiring or formally releasing the joint mortgage. A cash-out refinance handles this by paying off the old loan at closing. A loan assumption paired with a written release of liability from the lender does it too. If neither can happen right away, the buyout agreement should set a hard deadline for the refinance and a real consequence for missing it, such as the right to force a sale of the property.
The Documents That Make It Official
Buyout Agreement
The buyout agreement is the contract governing the whole transaction. It should state the purchase price, the payment method, the closing date, how costs will be split, any improvement or expense credits, and the deadline for refinancing. A real estate attorney typically charges $750 to $1,250 to draft or review one for a straightforward deal.
Quitclaim Deed
The quitclaim deed transfers whatever interest the departing owner holds to you. It makes no promises about the state of the title, which is acceptable between co-owners who already know the property’s history. The deed must include both parties’ full legal names and the property’s legal description (pulled from the existing deed or county records). Signatures are typically notarized, though requirements vary by jurisdiction. Once signed, the deed gets filed with the county recorder to put the ownership change on the public record. Recording fees run roughly $10 to $100.
New Owner’s Title Insurance
Existing title insurance often doesn’t carry over to a new ownership structure, and because a quitclaim carries no warranty, a fresh title search and owner’s policy protect you against undiscovered liens, boundary disputes, and other defects. An owner’s policy generally costs about 0.4% of the home’s value, or roughly $2,400 on a $600,000 property. It’s a one-time cost that lasts as long as you own the home.
Costs to Plan For
Most buyout costs land on the purchasing owner, though the agreement can split them however you negotiate.
- Home appraisal: $300 to $500, doubled if each side hires their own.
- Refinance closing costs: 2% to 5% of the new loan amount. On a $475,000 loan, that’s roughly $9,500 to $23,750.
- Real estate attorney: $750 to $1,250 for the buyout agreement and deed work.
- Title search and owner’s title insurance: about 0.4% of the home’s value, plus several hundred dollars for the search itself.
- Recording fees: $10 to $100 for filing the quitclaim deed.
- Transfer taxes: not every jurisdiction charges one, but where they exist they typically run from 0.01% up to around 2% of the property’s value. Check locally.
Tax Consequences to Watch
Capital Gains for the Person Selling Their Share
The IRS treats a buyout as a sale. The departing owner’s gain is the difference between their share of the buyout price and their cost basis (their share of the original purchase price, plus any capital improvements they paid for). Federal law lets a taxpayer exclude up to $250,000 of gain on the sale of a principal residence, or $500,000 for married couples filing jointly. To qualify, the seller must have owned and used the home as their main residence for at least two of the five years before the sale.4Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Most co-owner buyouts fall well inside the exclusion. The trap is timing: a departing owner who moved out more than three years before closing may no longer meet the use test and could lose the exclusion entirely.
Gift Tax If the Price Is Too Low
If the buyout price is meaningfully below fair market value, the IRS may treat the shortfall as a gift from the seller to the buyer. Gifts above the annual exclusion of $19,000 per recipient in 2026 require the donor to file a gift tax return.5Internal Revenue Service. What’s New – Estate and Gift Tax Filing doesn’t necessarily mean owing tax, since the amount counts against the lifetime exemption, but it does create a reporting obligation most people don’t anticipate. Pricing the buyout to the appraisal avoids the problem.
How the Transaction Unfolds
- Order the appraisal. Agree on the appraiser in advance, or each hire one and average the results.
- Calculate the payout. Subtract the mortgage balance from the appraised value, divide by ownership share, and adjust for any documented credits.
- Sign the buyout agreement covering price, payment method, timeline, cost allocation, and refinance deadline.
- Secure financing: apply for the cash-out refinance, start the assumption process, or line up alternative funds.
- Close. The new loan pays off the old mortgage, the departing owner receives the buyout payment, and the quitclaim deed is signed and notarized.
- Record the signed deed with the county recorder.
- Buy a new owner’s title insurance policy reflecting your sole ownership.
If the Other Co-Owner Won’t Cooperate
When the other owner refuses to sell their share or negotiate, a partition action may be the only path forward. This is a lawsuit asking a court to force the division or sale of jointly owned property, and it rests on a basic principle: no one can be forced to remain a co-owner indefinitely.
Courts resolve partition in one of a few ways. A partition in kind physically divides the property, which is almost never workable for a single-family home. The far more common result is a partition by sale, where the court orders the property sold and splits the proceeds according to each owner’s share. Some states also allow partition by appraisal, where the court orders one co-owner to buy the other out at an appraised price.
Partition is slow and expensive. Filing to resolution typically runs one to two years, with attorney fees stacking the whole time, and court-ordered sales often bring less than an open-market sale would. Treat it as a last resort once real negotiation has failed.