What If One Co-Owner Later Wants Out?

When you co-own a house, getting out of the deal may not be so simple. Neither of you probably want the other one to be able to sell his or her interest to any old third party (assuming there's even a market for a partial interest in a house). But that's exactly what can happen, because regardless of whether title is held as TIC or JTWROS, each co-owner does not legally need the other's approval to sell his or her interest in the property.

One way around this is to have a provision in the co-ownership agreement that requires a selling co-owner to give the co-owner who's staying a right of first refusal to purchase the interest. However, even with this provision, there are still several questions the co-ownership agreement will need to address:

• How will you fairly assess the property's value?
  
  
• Does the selling co-owner have to accept the buyout offer?
  
  
• What if the remaining co-owner can't come up with sufficient funds to buy out the selling co-owner?

Sharing the purchase of a home can significantly reduce your debt burden. But you should thoughtfully and carefully decide whether sharing homeownership makes sense for you and your potential cobuyer.