DEAR BOB: I co-own a summer home with siblings and first cousins. Our large group is not getting along and it looks like the property will have to be sold. No consensus can be reached among the co-owners for selling shares within the group, and threats of a partition lawsuit have developed. I am guessing most of the group will want to avoid this. Can a majority interest block a partition lawsuit? –Randy A.
DEAR RANDY: No. Anything can happen in a partition lawsuit to force the sale of a property when at least one co-owner wants to sell but another co-owner doesn’t.
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Partition is an ancient common-law tradition allowing a property to be sold despite a lack of agreement among all the co-owners. Most states allow partition lawsuits.
Majority rule does not apply to partition lawsuits. It is up to the judge to decide. For example, I’ve seen a judge give the co-owners 30 days to resolve their differences or he will order a sale of the property with the sales proceeds divided among the co-owners. For details, please consult a local real estate attorney where the property is located.
SHOULD HOMEOWNER SELL TO A REAL ESTATE INVESTOR?
DEAR BOB: We are putting our house on the market for sale this month. But our local market is very slow. If our house doesn’t sell before our new home is completed, what are the pros and cons of selling to an investor who advertises “We buy houses” in the newspaper? –Chauncey L.
DEAR CHAUNCEY: Real estate investors who advertise “We buy houses” usually offer a price highly discounted from full market value. In return, you get a quick cash sale. But don’t expect to receive top dollar.
REINVESTING HOME-SALE CASH WON’T AVOID CAPITAL GAINS
DEAR BOB: My wife and I (recently married) own homes with over $350,000 in equity each. If we sell those two homes and use all the profits to buy a larger home, can we avoid capital gains tax on both sales? Also, would it be to our advantage to add each other’s names on each house? –Mark S.
DEAR MARK: What you do with the sales proceeds is irrelevant to avoiding tax on the sales of those two houses.
If each of those houses were your principal residences before marriage, and if you each meet the Internal Revenue Code 121 requirement of 24 out of the last 60 months ownership and occupancy before sale, then you each can qualify for up to $250,000 tax-free profits on the sale of your separate residences. I don’t see any advantage to adding your name to the other’s house. For details, please consult your tax adviser.
The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Ask to Avoid Overpaying in a Buyer’s Market,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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