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Real Estate Buyout Agreement

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Updated June 26, 2026

A real estate buyout agreement finalizes the terms by which a co-owner of a property purchases another owner's share. These agreements are colloquially known as sibling buyout agreements because they often occur among siblings who collectively inherit property after a parent dies.

How to Buy Out a Real Estate Partner (5 Steps)

1. Agree on Property Value

Finding and hiring a home appraiser can help reduce disputes over the property’s value. Some good places to start looking for a home appraiser are the websites of the American Society of Appraisers and the National Association of Realtors.

2. Calculate Equity Shares

Calculate each owner’s equity share of the property by first subtracting the outstanding mortgage and selling costs from the property’s appraised value. Then multiply this by each owner’s ownership percentage.

3. Arrange Payment or Financing

If the buying owner doesn’t have enough money in the bank to finance the buyout, they can refinance, apply for a new mortgage, or apply for a loan. In the latter case, the applicant must qualify based on their own income and credit.

4. Draft Buyout Agreement

All owners must sign the buyout agreement once they agree on its terms.

5. Update Deed

The selling owner’s name must then be removed from the deed, which must be recorded with the recorder’s office in your county, sometimes called the register of deeds.

Real Estate Buyout FAQ

Is a sibling buyout taxable?

The cost basis of an inherited property is the market value at the time of the property-owning parent’s death. If the property appreciates between the time of inheritance and the buyout, then the selling sibling could owe capital gains tax.

Are commercial real estate buyouts different from residential real estate buyouts?

Real estate buyouts for commercial and residential properties typically work the same way, but commercial buyout agreements tend to be more complex. Commercial real estate is often valued according to the rental income it earns, which is not the case for residential real estate. It’s also worth noting that interest rates for commercial real estate buyout loans tend to be higher than rates for residential buyouts.

What’s a leveraged buyout?

A leveraged buyout is financed by borrowed money, meaning the buying owner takes out a mortgage, loan, or home equity line of credit to buy out the selling owner or owners. Most real estate buyouts involve some leverage.

What happens when siblings buy out a property held in trust?

In this case, the trust document directs the terms of the buyout, and the specified trustee oversees the process.

What are non-prime or non-QM loans, and can I use them to fund a sibling buyout?

Non-prime or non-QM (non-qualified mortgage) loans are loans from private lenders. They are more flexible than traditional loans, meaning they’re easier to qualify for, but they also tend to have higher interest rates and fees.