Having a vacation home in the mountains, by the lake, along a lake, or at a prime resort location is the dream that many homeowners have. Yet paying and maintaining a second house can be tough financially. For some people, they find that they can save money by having another person go in on the vacation home purchase deal.
By jointly owning the vacation house, also called fractional homeownership, each party pays a percentage of the home's mortgage loan, property taxes, homeowners insurance, and maintenance upkeep. Oftentimes, fractional ownership agreements happen between close relatives, in-laws, or friends who a part of the co-ownership. There may also be more than one additional party involved with the purchase, as it's possible to share the vacation home with two or more people separately.
Yet in the near or distant future, there may come a time where one party will want to sell the vacation house. Selling a co-owned vacation property is different from selling a permanent residence. The other parties may not want to sell their stakes in the property. In addition, the seller might not have a final say on what to accept as the asking price for their shares or even if a potential buyer can become a part of the co-ownership deal. Here are some factors to take into consideration if you want to sell a jointly-owned home.
Have an Exit Plan Stated in the Contract
One of the easiest ways of staving off any arguments when selling a vacation house owned by multiple people is to have it clearly state in an agreement between everyone on how to sell a vacation property that is purchased. This contract agreement should be made before anyone starts looking for a house to buy. The contract should go into detail about whether the other co-owners will be given the right of first refusal or rejection of a proposed buyer for the property, what to do about the existing mortgage, and whether the other co-owners can buy your shares.
Plan to Deal With Mortgages and Other Debts
It can be difficult to find buyers for a vacation home when there is a shared mortgage on the property. It can lead to financial hazards not only for those co-owners who still want to retain their shares of the house, but also for the new buyers. There are several options available when it comes to figuring out how to handle the mortgage and debts on a vacation house. Everyone may agree to simply pay off the mortgage completely, or to refinance the existing mortgage as the new buyer will assume responsibility.
Sell Shares to Someone New
When you are looking to sell your shares to someone new, ask those who are involved with vacation home to see if they are interested in purchasing your shares. You may have a number of reasons to move on from owning a vacation home with friends or family members, and it's important to be respectful as you look to sell shares to someone new. State your wishes to the other owners, and explain why you need to move on from ownership. If you can find a buyer for your share of the property that everyone can agree with, the entire process will be easier.
Forcing a Sale or Buyout
There may come a time when you want out, yet the co-owners aren't giving you many options where you can walk away from the ownership of the vacation house. You have tried to find buyers with little success, or the other co-owners have refused to work with the proposed buyers and have rejected all the offers that have been placed on the table. You may come to a point in time where you may want to force the sale of not only your share of the vacation house, but also the shares of the co-owners. You may also try to get the co-owners to purchase your shares on the property.
In these types of situations, having a clearly stated vacation home agreement regarding the full resell of the house or a buyout of the other party's shares can lessen the amount of disagreements that everyone has. In addition, the agreement should be revisited every so often to find out if all co-owners want to stick with this arrangement or walk away from owning the vacation home together.
Research About Fractional Ownership
Owning a vacation home with someone else can offer some great advantages, yet there are also obstacles that have to be considered. Just because you are the best of friends with someone doesn't mean that owning a home together will work out in the end.
Don't just think about the house and location into your home purchase decisions. Take into consideration whether you and the other person can commit to the financial and maintenance aspects of jointly owning a home. Also, you need to figure out if you can come to the right agreement in sharing the house with each other while still maintaining the friendship. Research and gain information about fractional ownership of real estate properties so you can avoid all the pitfalls and reap in all the rewards, and be sure to consult with your Nashville real estate agent along the way.
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