Real Estate & Friendships Sometimes Don't Mix Well

[David Paul]

Hey everyone, 

Two friends (probably former now) bought a house together. Let's call them Jacob and Michael. Yes. Real Situation, no not real names.

Things happen, friendship is over for whatever reason.

They were doing a house hack while renting out the other rooms to tenants.  The deed is in Jacob and Michael's name. 

Jacob moves away and wants noting to do with Michael or the house. Jacob is looking for a way to solve this where he doesn't take a major financial hit, but also where this doesn't end in (let's just be honest) tons of court fees and fighting.

Michael wants scorched earth and a 40% pay out which is a no go for Jacob.   Jacob calls me, and of course, I reach out to you geniuses.  Even though I don't think there's a way to get out of this without taking some sort of loss. 

[James McGovern]

 earth and a 40% pay out which is a no go for Jacob.   Jacob calls me, and of course, I reach out to you geniuses.  Even though I don't think there's a way to get out of this without taking some sort of loss. 

One should buy out the interests of the other. Any other idea will fail.

[Don Konipol]

Quote from @David Paul:

Hey everyone, 

Two friends (probably former now) bought a house together. Let's call them Jacob and Michael. Yes. Real Situation, no not real names.

Things happen, friendship is over for whatever reason.

They were doing a house hack while renting out the other rooms to tenants.  The deed is in Jacob and Michael's name. 

Jacob moves away and wants noting to do with Michael or the house. Jacob is looking for a way to solve this where he doesn't take a major financial hit, but also where this doesn't end in (let's just be honest) tons of court fees and fighting.

Michael wants scorched earth and a 40% pay out which is a no go for Jacob.   Jacob calls me, and of course, I reach out to you geniuses.  Even though I don't think there's a way to get out of this without taking some sort of loss. 

You haven’t provided any financial information so there’s no way anyone can answer the question about how not to take a loss.  If you’re asking how two immature individuals can handle their differences without legal costs then the answer is that they both have to give up the scorched earth policies.  If not the. Its like a brutal divorce.  Best suggestion is that both agree to professional meditation or better yet arbitration.  If they were mature and wanted to save costs and financially able, they could use the technique where one states a purchase price to buy the other out, and the other decides based on that price whether he wants to be the buyer or seller. But from what you described this has gotten PERSONAL.  Going into partnership solely because you’re friends usually doesn’t work out well. 

[David Paul]

Quote from @Don Konipol:

Quote from @David Paul:

Hey everyone, 

Two friends (probably former now) bought a house together. Let's call them Jacob and Michael. Yes. Real Situation, no not real names.

Things happen, friendship is over for whatever reason.

They were doing a house hack while renting out the other rooms to tenants.  The deed is in Jacob and Michael's name. 

Jacob moves away and wants noting to do with Michael or the house. Jacob is looking for a way to solve this where he doesn't take a major financial hit, but also where this doesn't end in (let's just be honest) tons of court fees and fighting.

Michael wants scorched earth and a 40% pay out which is a no go for Jacob.   Jacob calls me, and of course, I reach out to you geniuses.  Even though I don't think there's a way to get out of this without taking some sort of loss. 

You haven’t provided any financial information so there’s no way anyone can answer the question about how not to take a loss.  If you’re asking how two immature individuals can handle their differences without legal costs then the answer is that they both have to give up the scorched earth policies.  If not the. Its like a brutal divorce.  Best suggestion is that both agree to professional meditation or better yet arbitration.  If they were mature and wanted to save costs and financially able, they could use the technique where one states a purchase price to buy the other out, and the other decides based on that price whether he wants to be the buyer or seller. But from what you described this has gotten PERSONAL.  Going into partnership solely because you’re friends usually doesn’t work out well. 

 Facts. Completely agree.  I went ahead and just recommended that they get lawyers involved and go from there. If both can't come up with an agreement without one trying to hurt the other then the response is going to be a legal one. Thanks Don! 

[Mike Dymski]

Follow the terms of their partnership agreement.  Absent one, sell and split the proceeds based on their cash contribution to the purchase.  If Michael wants to keep the house, he buys out Jacob based on Jacob's cash contribution to the purchase plus/minus some percentage of the appreciation/depreciation since purchase (% could be based on their respective cash contributions to the purchase).

[David Paul]

Quote from @Mike Dymski:

Follow the terms of their partnership agreement.  Absent one, sell and split the proceeds based on their cash contribution to the purchase.  If Michael wants to keep the house, he buys out Jacob based on Jacob's cash contribution to the purchase plus/minus some percentage of the appreciation/depreciation since purchase (% could be based on their respective cash contributions to the purchase).

Thanks Mike! 

[Alecia Loveless]

@David Paul Get a couple of BPOs and an appraisal. Take the average of these as the sales price.

Decide if one will buy out the other or if the best action is to sell.

[David Paul]

Quote from @Alecia Loveless:

@David Paul Get a couple of BPOs and an appraisal. Take the average of these as the sales price.

Decide if one will buy out the other or if the best action is to sell.

Thanks Alecia, will keep you updated.