Detailed answer — step-by-step guide

This answer explains the common methods, the lender and title steps, and what to do if the other owner won’t cooperate. This is educational information only and not legal advice. Consult a Minnesota attorney and your lender before taking action.

Overview

When two or more people co-own real estate and one owner wants to remain in the property while the other(s) exit, the most common route is a buyout. A buyout usually happens two ways:

• The staying owner refinances the mortgage in their name only and uses the new loan proceeds to pay the departing owner their share of the equity; or
• The staying owner obtains other funds (savings, a loan, investor funds) to pay the departing owner and then removes that owner from title.

Step 1 — Figure out ownership share and property value

– Get a current market valuation. Use a licensed appraiser for the most reliable number. A broker price opinion or comparative market analysis can help for a preliminary figure.

– Determine each owner’s legal and equitable share. If title or a written agreement says each owner has a 50/50 interest, that is the starting point for splitting equity. If contributions or agreement language differ, document that information.

Step 2 — Choose a buyout method

Common options:

• Refinance and pay off joint loan: The staying owner applies for a refinance in their own name. The new loan pays off the existing mortgage. At closing, the departing owner receives their equity share.
• Private buyout without refinancing: The staying owner pays the other owner from savings, a private loan, or a seller-financed promissory note. If the original mortgage remains, the departing owner should insist on a lien or release arrangement until fully paid.
• Assumption: If the lender permits, the staying owner may assume the existing mortgage. Assumptions require lender approval and often a credit check.

Step 3 — Refinancing process (if that route is chosen)

1. Prequalification: The staying owner applies to a mortgage lender alone. The lender evaluates credit, income, debt-to-income ratio, and assets.
2. Appraisal and underwriting: The lender orders an appraisal and completes underwriting.
3. Payoff of old loan: The refinance closing pays off the joint mortgage and any liens shown on title.
4. Distribution to departing owner: At closing, the title/settlement agent issues the departing owner their agreed equity share (after paying off the mortgage, closing costs, and any liens).
5. Title and deed change: The departing owner signs a deed (commonly a quitclaim or warranty deed) transferring their interest to the staying owner. The deed is recorded with the county.

Note: A lender will not remove a person from the mortgage until the mortgage is paid in full or the lender approves an assumption. Removing someone from title (through a deed) does not remove that person’s obligation on the mortgage unless the loan is refinanced or assumed by the remaining owner with lender approval.

Step 4 — Deed, title insurance, and recording

– Use a deed document to transfer title. Many sellers use a quitclaim deed to transfer their interest quickly. A warranty deed may be used where warranties are needed. A Minnesota-licensed attorney or title company can prepare and review the deed language.

– Record the deed in the county recorder’s office where the property sits. Recording puts the world on notice that ownership changed. See Minnesota’s recording statutes for more on recording requirements: Minn. Stat. ch. 507.

– Obtain title insurance and ensure any outstanding liens are cleared. The title company typically coordinates payoff and recording at closing.

Step 5 — Payoff details and handling equity

– Calculate the net sale value available for distribution: appraisal value minus mortgage balance, closing costs, prorations, and any liens.

– The departing owner should receive a written settlement statement showing how their payment was calculated.

What if the co-owner refuses to cooperate?

If a co-owner will not sign a deed or accept a buyout, Minnesota law allows a forced partition action. A partition action asks the court to divide the property or order a sale and split the proceeds.

Partition is a legal remedy where the court may:

• Divide the property physically (if feasible), or
• Order a sale and distribute the net proceeds among owners.

See Minnesota’s partition statutes for procedures and remedies: Minn. Stat. ch. 524. A partition case involves court costs, attorney fees, and the risk that the property will sell at auction or under court order, often for less than full market value.

Other important considerations

• Mortgage liability: If the departing owner remains on the mortgage because the loan is not refinanced or assumed, their credit remains at risk if the staying owner misses payments.
• Taxes: Buying out an owner can have tax consequences (capital gains, changes to basis, gift implications). Consult a tax advisor.
• Contracts: Put the buyout agreement in writing. Spell out the price, payment timing, security for deferred payments, and who pays closing costs and transfer fees.
• Title or mortgage issues: Existing liens, judgments, or taxes must be cleared or handled at closing.

Helpful hints

• Get a professional appraisal to avoid disputes about value.
• Talk to several lenders before choosing a refinance; underwriting standards and rates vary.
• If you cannot refinance alone because of credit or income, consider a cosigner (with caution) or alternative funding.
• Use a settlement agent or title company to handle payoffs, escrows, and recording to reduce mistakes.
• If you accept a promissory note from the staying owner, secure it with a mortgage or deed of trust so the departing owner is protected.
• Keep careful records of payments and signed closing documents. Obtain a final recorded deed and, if applicable, a lender’s release of the departing owner.
• Before proceeding, have a Minnesota real estate attorney review or draft the buyout agreement and deed language to protect your rights.