Detailed Answer

Overview — what “refinancing and buying out” means

Refinancing and buying out another owner usually means one co-owner obtains a new mortgage in their own name (or a new loan) large enough to pay the other co-owner the agreed value of their ownership interest. After payment, the selling owner transfers their ownership interest (typically by deed), and the buyer records that deed so title shows the single owner.

Step 1 — Confirm ownership, mortgage status, and any contractual limits

Start by reviewing the recorded deed(s) and current mortgage paperwork. Confirm each person’s ownership share (joint tenants, tenants in common, or community property if married). Identify whether the mortgage has a due-on-sale or co-borrower clause that requires lender notice or approval when ownership changes. Obtain a recent mortgage statement and a copy of the deed from the county recorder.

Step 2 — Get a reliable market value

Obtain a professional appraisal or broker price opinion. The appraised market value determines the buyout amount. Example (hypothetical): home appraises at $400,000. A 50% co-owner’s share equals $200,000 before adjustments for outstanding mortgage and closing costs.

Step 3 — Agree on buyout terms (price, timing, and method)

Co-owners should put buyout terms in writing. Common options:

• One-time cash payment at closing.
• Promissory note from the remaining owner to the selling owner (seller financing).
• Combination of partial cash and a note.

Agreement should state the buyout amount, payment schedule (if any), whether interest applies, security (e.g., trust deed), and consequences of default.

Step 4 — Check lender requirements for removing a borrower

If the property currently secures a mortgage in both owners’ names, the lender may require payoff of the existing mortgage and a new loan in the remaining owner’s name alone to remove the other borrower. Speak with lenders early so you know required credit, income documentation, and maximum loan amount.

Step 5 — Apply for refinance or secure funds

The remaining owner applies for a new mortgage sized to pay off the existing mortgage (if any) and to fund the buyout. Other funding options include home equity lines of credit (HELOC), cash savings, or a private loan. Lenders will underwrite based on the applicant’s credit score, income, assets, and debt-to-income ratio.

Step 6 — Closing — payoff, deed transfer, and recording

At closing the process typically looks like this:

1. The refinance lender pays off the old mortgage (if one exists).
2. The buyer of the co-owner’s interest pays the selling co-owner the agreed buyout amount (funded by the new mortgage or other sources).
3. The selling co-owner signs a deed (usually a quitclaim or warranty deed) transferring their interest to the remaining owner. The deed is notarized and sent to the county recorder for recording.
4. Title updates and any mortgage lien releases are recorded.

Step 7 — Taxes, fees and recording

Washington imposes a real estate excise tax (REET) on most transfers of real property. Check RCW chapter 82.45 for how REET may apply and for exemptions that might reduce or eliminate the tax for certain intrafamily or divorce-related transfers: RCW Title 82, chapter 45 (REET). Also budget for closing costs, title company fees, and county recording fees.

Step 8 — If you cannot agree: partition action

If co-owners cannot reach an agreement, Washington law allows a co-owner to ask the court to divide or sell the property through a partition action. A court can order physical division or sale with proceeds divided according to ownership shares. See Washington’s partition statutes: RCW Title 7, chapter 52 (Partition).

Documents you will typically need

• Current deed and title report.
• Current mortgage statement and payoff figures.
• Appraisal or broker price opinion.
• Buyer’s loan application documents (pay stubs, tax returns, bank statements, ID).
• Signed deed transferring the seller’s interest (quitclaim or warranty deed).
• Written buyout agreement if the sale is not simultaneous with refinance.

Common complications and how to handle them

• Poor credit or insufficient income to refinance: consider seller financing or a co-signer, or negotiate a structured payment plan with the selling owner.
• Mortgage with due-on-sale clause or lender refusal to release: the lender can require payoff. You may need to pay the existing loan in full through refinance.
• Tax consequences and REET: consult a tax advisor about any income tax or excise tax implications.
• Disagreement over valuation: use an independent appraisal or mediation to resolve valuation disputes.

Sample hypothetical calculation

Appraised value: $400,000. Outstanding mortgage payoff: $150,000. Co-owner owns 50%.

Buyout share (50% of equity): equity = $400,000 – $150,000 = $250,000; 50% = $125,000.

The remaining owner would need at least $125,000 (plus closing costs and any cash needed to bring loan-to-value in line with lender rules) to buy out the co-owner. Many borrowers refinance for a new loan that pays off the $150,000 mortgage and also advances $125,000 to buy out the co‑owner; the new loan would be about $275,000 plus closing costs.

After closing — update insurance and records

Update homeowner’s insurance to reflect the sole owner and new mortgagee (if applicable). Obtain an updated title policy or endorsement if desired. Keep recorded deeds and closing documents in a safe place.

Important legal note: The partition statutes and REET rules are state law examples that apply in Washington. For details about how these laws apply to your situation, see the statutory links below and consider consulting a licensed Washington attorney.

Relevant Washington statutes:

• Partition actions: RCW Title 7, chapter 52.
• Real estate excise tax: RCW Title 82, chapter 45.
• Forms and conveyance rules for deeds: RCW Title 64, chapter 04 (conveyances and deed recording topics).

This is not legal advice. Laws change and fact-specific issues may alter the correct approach. Consider talking with a Washington-licensed attorney or a real estate closing professional before you sign agreements or refinance.

Helpful Hints

• Get an independent appraisal early. A clear market value speeds negotiation and lender sizing.
• Talk to potential lenders before finalizing buyout terms so you know how much they will lend and what documentation they require.
• Put buyout agreements in writing. Oral promises are hard to enforce.
• Anticipate REET and closing costs; they can change whether a buyer uses cash or financing.
• If one co-owner refuses to cooperate, consider mediation before filing a partition action to save time and costs.
• Keep clear records: recorded deed, payoff letters, closing statements, and any promissory notes or security instruments used for seller financing.
• Check title insurance and update policies after the transaction to protect against unknown title claims.
• If you are married, also check Washington community property rules and whether a spouse’s signature or consent is required.
• When in doubt about legal terms, consult a Washington-licensed attorney who handles real estate and co‑ownership disputes.