Myself and a friend purchased a home in 2013 as joint owners (50/50) with a 15year mortgage. We both lived there until 2015 when I moved out. The friend remains living there to today. We have reached a point whereby either I am looking to sell my 50% of the house onto somebody else (somebody we also know and trust) or we look into renting the house out (this option is less favoured by the current friend living there over worries of damage and wear and tear by tenants).
I am essentially looking for advice on my options and thinking long term.
1. If I do sell my 50% am I going to have to pay tax and how much? (since its not my primary residence - I have been renting since I moved out in different parts of the country. although I haven't lived there I do think of it as my primary residence - I have my bills and bank accounts at that address etc. Does that count?)
2. if I do sell, what do we need consider in terms of negotiating the price (remaining mortgage, repairs completed, future repairs)
Thanks for any advice
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1. A bit confused and unclear on the "primary residence" part. Was it your primary residence for "at least" two of the last 5 years you owned it? If yes, then you will pay no taxes on any gain realized that is less than $250K.
2. Remaining mortgage has nothing to do with the selling price of your 50%. The best thing to do is to get an appraisal on the property and start your negotiations there. One thing that has to happen if your name is on the corrent mortgage, is that even if the other owner buys it, they will need to finance their purchase price to completely pay off the existing loan and take out a new mortgage that does not have your name on it. So long as your name remains on the existing mortgage, you have a legal obligation to pay it. It doesn't matter if you do a quit claim on the property deed either. That does not remove your name from the mortgage and does not release you from your legal obligation to pay it.
Overall, I would highly suggest you get with a realtor in your local area. While I would not expect a realtor to be informed so much on the tax side of things, they are familiar with the legalities of all this so that after the sale you can walk away "truly" free from any and all obligations on the property. A realtor also has a better "feel" for the market and can be more realistic in helping you negotiate a price. Generally the realtor gets up to 6% of your gross sales price as commission - it's how they make a living and it's generally worth it to both the seller and the buyer.
#1 - your primary residence is where you sleep at night at a minimum. where you get your electric bills, etc is not the determining factor.
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