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Real Estate Buyout Agreement

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Updated October 13, 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.

FAQ

Is a sibling buyout taxable?

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?

Commercial real estate is often valued according to the rental income earned, 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 obtain, but also tend to have higher interest rates and fees.

Sample

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