- Selling Jointly Owned Property When One Partner Refuses is Challenging
- Understanding Joint Property Ownership
- Common Reasons Why a Partner Might Refuse a Sale of Co-Owned Property
- What are your Options when One Partner Refuses to Sell a House?
- How Does A Buyout Work in Joint Ownership Multiple Owners?
- Can You Force a Sale When One Partner Refuses?
- How to Negotiate with Your Partner?
- Hire a Real Estate Agent for Your Sale
How to Sell a House When One Partner Refuses?
Finding yourself in a situation where you want to sell a house and the co-owner refuses, or vice versa, can be an emotionally charged and financially challenging experience.
This discord in property ownership can result from a variety of circumstances: maybe it’s the division of marital property during a divorce, the inheritance of community property, or a disagreement over the sale of jointly owned property.
The common thread in all these scenarios is that conflict arises when one party wants to sell and the other doesn’t, leading to a real estate deadlock. But how do you solve it? No one wants to be forced into hiring a real estate attorney.
A house sale involves a financial investment, legal regulations, and emotional ties. It can be steeped in personal and economic conflicts when all parties disagree. If you’re trying to navigate these choppy waters, this article aims to provide helpful information and guidance.
Your goal should always be to find practical solutions that avoid legal counsel or litigation.
Selling Jointly Owned Property When One Partner Refuses is Challenging
Even in the most harmonious circumstances, selling jointly owned property can be complicated. It involves agreement on how to list, how much to sell for, any repairs required, which real estate agent to hire, and much more.
Now imagine how these elements become even more complicated when one or more one party is unwilling to sell a house.
Selling property when one party refuses is compounded by complexities that warrant careful consideration.
From a purely legal perspective, the rights of all property owners must be respected. In most jurisdictions, a jointly owned property cannot be sold unless all co-owners consent.
This legal boundary aims to protect property owners’ rights and prevent one party from unfairly selling an asset from underneath another.
While it makes sense, this ownership limitation can lead to conflict that often results in costly legal battles. No one wants to be trapped in property ownership; likewise, no one wants to be forced to sell a property they want to continue owning.
However, one thing to remember is that how a property is sold can depend on the type of ownership in which a property is held. So, here’s a question: do you know the kind of ownership your property deed is held under?
Tenants in common and jointly owned property have different requirements, which we will get into later in this article.
Don’t overlook the emotional factors of selling a property.
In many situations, co-owned properties are purchased by two parties with a personal relationship as much as a financial one. They could be a married couple, family members, or friends.
If you’re selling a personal residence, remember that you’re not just selling bricks and mortar but a property with memories, experiences, and a sense of familiarity. The emotional attachment can make it incredibly difficult for a party to agree to sell, especially if it’s a family home.
Whether the relationship with your co-owner has already broken down or you are trying to preserve that relationship, navigating the emotional complexities of this sale is akin to walking a tightrope. You must carefully consider the implications of your actions and words and how they will impact other parties.
Understanding Joint Property Ownership
When you’re navigating a sale of jointly owned property, especially when one owner refuses the home sale,
First, start by understanding the different types of joint ownership and how property ownership is determined. There are several types of joint ownership, including joint tenancy, community property, and tenancy in common. The legal implications of a property sale can change between each ownership type.
Joint tenancy is the most common form of joint ownership. It is when two or more individuals hold property together, each with equal rights and responsibilities.
A notable characteristic of joint tenancy is the ‘right of survivorship.’
The right to survivorship means that if one joint tenant dies, their share of the property automatically goes to the surviving joint tenant(s), regardless of any will or testamentary provisions.
So, let’s simplify with an example.
John and Mary, an unmarried couple, buy a house together as joint tenants, meaning they both own the entire property equally. Unfortunately, John passes away. Due to the ‘right of survivorship’ in a joint tenancy, John’s share of the property automatically transfers to Mary even though they were never married, making her the sole owner.
Tenancy in Common
Tenancy in common allows two or more individuals to hold title to a property jointly but with distinct, separable shares. One benefit of a tenancy in a common relationship is that shares can be held equally or unequally, depending on the owners’ agreement. For example, one party can own 90% of a property while another only owns 10%.
Unlike joint tenancy, there’s no right of survivorship in a tenancy in common. If one tenant dies, their share of the property goes to their heir or designated beneficiary, not automatically to the surviving co-tenant(s). Therefore, all parties should diligently maintain an up-to-date will to avoid probate issues in these ownership arrangements.
A considerable benefit of tenants in a common ownership arrangement is that one owner can sell their shares of a property without the consent of other owners because their ownership share is considered separate property.
While a forced sale of the entire property isn’t possible, these owners have a limited option to exit their ownership arrangement, whether selling to other owners or a third party.
Community property is a type of joint property ownership applicable primarily in some US states, known as community property states. States that observe community property laws include:
- New Mexico
- Texas, Washington
- Residents of Alaska may opt-in to community property arrangements
In community property states, property acquired during a marriage is considered jointly owned by both spouses, regardless of who paid for it (unless explicitly signed away a property deed in writing).
However, property received as a gift, through inheritance, or acquired before the marriage is often excluded.
Common Reasons Why a Partner Might Refuse a Sale of Co-Owned Property
The reasons why a co-owner would refuse to sell a house are innumerable, and it’s impossible to put limitations on each situation.
However, the most common reasons why someone would refuse to partake in a house sale are often common sense.
Emotional attachment to a property is by far one of the most common and understandable reasons a co-owner refuses a home sale. Especially if the partner’s original intentions upon purchasing were to stay in the property. Having an emotional attachment to a home is particularly common during a divorce settlement.
A home is where life unfolds; for many, it holds memories making it hard to let go of. This is particularly true of the property in question is a family home. While houses can be financial assets, they can also be deeply personal.
Common reasons for emotional attachment to a property include:
- The property is a family or marital home
- The property was inherited from a family member or loved one
- Attachment to the area
- Pride of ownership
- A sense of belonging
- Fear of loss or change
When one partner refuses to sell due to an emotional attachment that the motivated partner doesn’t have, you have a situation where each co-owner has divergent priorities. Start by having open communication about the property and its potential sale. Understand the reluctant partner’s concerns.
Then, get to work on finding a compromise. Entering a legal process should be your last resort.
If one partner is not ready to sell, but the other wants to explore other opportunities, renting or leasing the property can be a possible compromise. If selling the entire property is not agreeable, exploring options for partial ownership or shared usage can provide a compromise.
Alternatively, if overcoming the emotional attachment seems unlikely, partners can discuss other options like purchasing another property together that accommodates the emotional attachment while allowing the partner who wants to sell to pursue their goals.
In situations of emotional attachment and disagreement that are particularly challenging to resolve, seeking the assistance of a mediator or counselor can be beneficial. Mediators are unbiased third parties who help co-owners find a middle ground. Seek out all alternative options before pursuing a court-ordered sale.
At their core, houses are financial assets. A co-owner in real estate may choose not to sell their property due to their perspective of property as a valuable financial asset and a long-term investment.
Most real estate owners recognize that real estate has the potential for appreciation over time. Furthermore, it has the potential to provide considerable cash flow.
A co-owner could find it financially disadvantageous to sell if they:
- Have to pay capital gains tax and cannot do a 1031 exchange.
- Have been receiving consistent cash flow on the asset.
- Are unable to purchase a comparable replacement property on their own.
- Will not qualify for a loan on a new property.
- Will face higher property taxes or interest rates on a new property.
- Feel that the property is positioned for value appreciation.
Before pursuing a court order, uncover why your co-partner refuses to sell and search for an amicable solution. Financial motivation is often far easier to overcome than emotional attachment.
What are your Options when One Partner Refuses to Sell a House?
When one owner refuses to sell a house, you’re in a sticky situation, but that doesn’t mean you don’t have options.
From the start, your goal should be to find a compromise that works for all parties. Starting with a negative mindset will result in negative solutions that will likely cost you money (lawsuits are expensive).
Option #1: Co-Owner Buyout
If one co-owner doesn’t want to sell, they may be willing to take on the entirety of the property’s ownership or at least buy out the parties that want to sell. A buyout agreement can be an easy solution when there are only two owners or in a joint tenancy.
If there’s a mortgage on the property or the co-owner needs to take out a loan to complete the buyout, they will also need to qualify for the loan and mortgage payments.
However, sometimes the co-owner can’t qualify for the necessary loan. In these situations, consider seller financing or a carryback, which is when the seller acts as the lender and provides financing to the buyer instead of the buyer obtaining a traditional mortgage.
Option #2: Exchange Your Equity for Another Valuable Asset
If you’re desperate to get out from the ownership of a jointly owned property, exchanging it for another valuable asset could be a viable option.
We see this option often used with the division of marital property. If one spouse wants to hold onto the marital home, the other may opt to receive a jointly held stock portfolio or other assets. Find an amicable solution that accounts for the property’s fair market value.
Option #3: Financial Incentives
A co-owner who refuses to sell might think twice if provided the right financial incentive. The prospect of receiving more than their allotted shared property might have them singing a different tune.
Financial incentives you can offer include paying:
- All of the real estate agent fees.
- Some of your proceeds to the unwilling seller, meaning they receive more than their 50%.
- For some of the unwilling seller’s capital gains tax.
- A cash bonus.
It might feel unfair that you have to sacrifice some of your equity only for your partner to receive more money, but what do you think it would cost if you had to get lawyers involved?
Option #4: Legal Process
While you can’t necessarily force a sale, state laws do have provisions for situations when one partner refuses to sell while the other needs to.
Involving a judge to compel the sale of a house is expensive. It involves lawyers and fees; ultimately, all partners lose.
How Does A Buyout Work in Joint Ownership Multiple Owners?
A buyout agreement is often the best option when one co-owner refuses to sell. In a buyout, one owner pays the other for their share of equity, and co-ownership ends.
Buyouts typically happen during a divorce or separation, however, they can also occur in a joint tenancy situation when one co-owner purchases another owner’s share in the property.
Step 1: Get a Professional Valuation
To ensure a fair split, get an appraisal or professional valuation of the joint property or business.
A professional appraiser or business valuator will assess the asset’s worth based on various factors such as market conditions, comparable sales, financial performance, and future earning potential.
Their expertise ensures an unbiased and accurate assessment of the property or business’s value, which forms the foundation for calculating the buyout price.
Step 2: Calculate the Buyout Price
Buyout prices are calculated based on how ownership is held.
- Equal Ownership: If the joint ownership is equal, determining the buyout price is straightforward. The buyout amount would be 50% of the appraised value.
- Unequal Ownership: In cases where the ownership shares are not equal, the buyout price can be calculated based on the percentage of ownership.
- Operating Agreement or Partnership Agreement: In some joint ownership arrangements involving an LLC or Partnership, an operating or partnership agreement may have a predetermined formula for determining the buyout price.
Step 3: Negotiate the Buyout Terms
Once a buyout price is determined, you need to agree upon terms. Terms to consider include:
- Seller financing (if required)
- Payment terms
- Tax implications
A buyout in joint ownership requires a careful and considerate approach to ensure a fair and smooth transition.
Set yourself up for success by engaging a real estate professional, accountant, and real estate attorney to guide you.
Can You Force a Sale When One Partner Refuses?
Yes, a forced sale is possible. However, it’s costly.
A forced sale involves a partition action. A partition action is a legal process undertaken when co-owners of a property cannot agree on the terms of its sale, usage, or distribution.
There are two types of partition action:
Partition in Kind
A partition in kind is often used when the subject property is large and easily divided, for example, a ranch or farmland.
Each owner ends up with a portion of the property that matches their ownership share.
However, it’s important to keep in mind that the division of property can sometimes devalue it, so not only will the co-owners have to pay legal fees, but they may lose equity.
Partition by Sale
When a physical division of sale is not possible, for example, in the case of a family home, the court may order a partition by sale.
In this case, a real estate agent is engaged, the property is sold, and the proceeds are divided among the co-owners according to their ownership percentage.
A partition by sale is often the course of action during divorce proceedings.
Legal Proceedings and Court-Ordered Sales in Divorce Cases
Divorce is emotional and expensive. If there’s a family home and property division involved, even more so. Sometimes, separating couples are forced to hire a divorce attorney and involve a family law judge.
When negotiating a situation where one spouse can buy out the other spouse is impossible, a court order to sell the house might be necessary.
The court-ordered sale process begins with one party filing a partition action. Once the court issues the sale order, the property is:
- Listed with a real estate agent, who is sometimes court appointed.
The sale proceeds are first used to pay off any liens or debts, and the remaining funds are distributed to the divorced couple per their divorce agreement.
A partition action should be your last resort as it will cost you money and most likely damage the relationship with your co-owner. Try to seek out all other avenues of negotiation first.
How to Negotiate with Your Partner?
Negotiating with a partner who doesn’t want to sell is challenging and involves perspective, empathy, and the willingness to find a middle ground.
However, negotiation is always the best course of action to avoid costly legal battles. Here are some tips to get you started on the right foot and increase your chances of a successful negotiation.
Tip #1: Open Communication
A straightforward discussion about your intentions and reasons for wanting to sell the property is a great place to start. Be clear about your intentions and be prepared to listen to their feedback and perspective. You might be surprised by how easy it is to get on the same page.
Tip #2: Understand Their Perspective
Understanding your co-owner’s perspective will give you insight into their reservations and how to address them. They may have emotional attachments to the property, financial concerns, or other personal reasons for not wanting to sell. Respect their views and use this knowledge to structure your arguments.
Tip #3: Patience and Persistence
Negotiations take time, especially when emotions are heightened. Be prepared to have several conversations and discussions before you are both on the same page.
Selling a house or property when one partner refuses is a situation no one wants to end up in, but fortunately, there are options.
Always start with the intention of finding a middle ground that works for all parties.
Emotional attachments to the property, financial motivations, and other personal reasons can contribute to a partner’s refusal to sell. Approach the situation with empathy and open communication to find common ground and potential compromises.
Consider all options, including co-owner buyouts, exchanging equity for other valuable assets, providing financial incentives, and engaging in negotiation.
Hire a Real Estate Agent for Your Sale
Once you have reached a point where it’s time to sell your co-owned property, you need to hire a skilled real estate agent who can navigate relationships with both co-owners. Start your search for a top real estate agent with FastExpert.