We see a lot of unmarried couples, friends, and a parent/child choosing to buy a home together. In Texas, when two or more unmarried people buy real property together, this is known as co-ownership. There are lots of good reasons to become co-owners, such as building equity and pooling resources.

As a realtor, you have likely seen disputes arise when the parties have different expectations. You can best serve your co-owner clients by encouraging them to set up clear agreements for their co-ownership arrangement to ensure all parties are on the same page. We can assist in drafting simple agreements to help avoid misunderstandings. This will ensure there has been effective communication on all the important topics, so the parties enter into the co-ownership in alignment.

A written agreement usually helps before there is a dispute. After there is a disagreement, though, things can be challenging. Action must be taken because, under Texas law, a co-owner cannot be forced to remain in a joint ownership. There are three options: buy-out, sell off, or a partition.

1.     Buyout

The buyout option is relatively straightforward. One co-owner pays the other owner(s). The complicated part usually comes when the parties try to agree on a fair price. Realtors can play a key role in helping co-owners assess the current market value. When the parties can agree on a price, a complicated situation can get resolved in a rather simple matter.

2.     Sell the House

Again, this is a simple option. The house is sold, and the profits are divided among the owners. It can get complicated when a sale would result in a deficient, when the parties cannot agree on a sale price, when the parties cannot agree on a realtor, when the house sits on the market for a while, or if one owner does not think the split is fair. Realtors can help the co-owners navigate all these pitfalls with their expertise, if they will listen.

3.     Partition

Under the Texas Property Code, a joint owner has the right to initiate a partition action of a property. The first step is to file in court. The Judge will determine the interests of each co-owner. Then, the court will determine if there should be physical division of the property (partition in kind) or a sale of the property with the proceeds divided (partition by sale). Courts favor partition in kind over partition by sale to avoid forcing property owners to sell against their will, whenever possible. Splitting vacant land is one example of the Courts implementing a partition in kind. However, in many cases, a physical division is not possible without severely diminishing the value of the property. Can you imagine anyone buying half a single-family home? If the court determines that the house will be sold, then it determines how the proceeds will be divided among the co-owners. Hint: the Court may not decide to implement an even split of the proceeds. Partitions can be complex and costly – often involving competing appraisals, months of litigation, and mounting attorney’s fees.

As a realtor, you are likely the first call of a co-owner in a tight spot. It is critical that you understand their options. By using your skills in property valuation and market timing, you may be able to help the parties have open discussions to come to a fair compromise. And you may ultimately save them thousands on legal fees.

Regardless of whether the Court must be involved or not, by demystifying the partition proceeding, you can position yourself as a top-notch realtor providing the best service to your clients.

As always, if you have any questions or concerns about the implications of disputing co-owners or the need for a partition action, don’t hesitate to reach out to SimpleLawTX! We are also here if you need a co-owner agreement drawn to prevent many of these hazards. Our team can provide personalized guidance and support to help you navigate complex real estate transactions with confidence.

Contact SimpleLawTX today to schedule a consultation via our website https://www.simplelawtx.com/, phone 281-697-6678, or email contact@simplelawtx.com.