# not related to computers, but need a geek..

Discussion in 'NZ Computing' started by nntp.aioe.org, Feb 28, 2008.

1. ### nntp.aioe.orgGuest

Maths time
My brain is just not working and my answer seems wrong..

2 people own 1 house.
one wants to buy the other ones half out

The house is currently valued at 400k
remaining on the mortgage is 190k

How much should be offered to the other party to buy out exactly one half

My answer was \$295k but it just doesnt feel right

My other question is to buy out someones half, Do you go by current
market house rates, OR do you just work it on the original borrowed amount?
how do these things work.

i believe the house was purchased for \$220k

nntp.aioe.org, Feb 28, 2008

2. ### EMBGuest

nntp.aioe.org wrote:
> Maths time
> My brain is just not working and my answer seems wrong..
>
> 2 people own 1 house.
> one wants to buy the other ones half out
>
> The house is currently valued at 400k
> remaining on the mortgage is 190k
>
> How much should be offered to the other party to buy out exactly one half

\$200K and take over the mortgage if current value is what is agreed as
the "value" of the house.
>
> My answer was \$295k but it just doesnt feel right
>
> My other question is to buy out someones half, Do you go by current
> market house rates, OR do you just work it on the original borrowed amount?
> how do these things work.
>
> i believe the house was purchased for \$220k

So there's only \$30K of equity based on the original purchase price
(effectively none). I'd allow half the capital gain in doing the sums
and call \$310K the "value" and be willing to pay half that as a maximum

The only foolproof way not open to argument is to just sell the
property, settle the mortgage and spilt the proceeds evenly.

EMB, Feb 28, 2008

3. ### nntp.aioe.orgGuest

EMB wrote:
> nntp.aioe.org wrote:
>> Maths time
>> My brain is just not working and my answer seems wrong..
>>
>> 2 people own 1 house.
>> one wants to buy the other ones half out
>>
>> The house is currently valued at 400k
>> remaining on the mortgage is 190k
>>
>> How much should be offered to the other party to buy out exactly one half

>
> \$200K and take over the mortgage if current value is what is agreed as
> the "value" of the house.

interesting, Can you tell me how you reached that number? - basically if
i pass on the message i will be asked why that amount

>>
>> My answer was \$295k but it just doesnt feel right
>>
>> My other question is to buy out someones half, Do you go by current
>> market house rates, OR do you just work it on the original borrowed
>> amount?
>> how do these things work.
>>
>> i believe the house was purchased for \$220k

>
> So there's only \$30K of equity based on the original purchase price
> (effectively none). I'd allow half the capital gain in doing the sums
> and call \$310K the "value" and be willing to pay half that as a maximum
>
> The only foolproof way not open to argument is to just sell the
> property, settle the mortgage and spilt the proceeds evenly.

I agree, But i have been told to find out

nntp.aioe.org, Feb 28, 2008
4. ### shaneGuest

nntp.aioe.org did scribble:

> Maths time
> My brain is just not working and my answer seems wrong..
>
> 2 people own 1 house.
> one wants to buy the other ones half out
>
> The house is currently valued at 400k
> remaining on the mortgage is 190k
>
> How much should be offered to the other party to buy out exactly one half
>
> My answer was \$295k but it just doesnt feel right
>
> My other question is to buy out someones half, Do you go by current
> market house rates, OR do you just work it on the original borrowed amount?
> how do these things work.
>
> i believe the house was purchased for \$220k

105k
400k/2 - 190k/2

--
Hardware n: Parts of the computer you can kick

shane, Feb 28, 2008
5. ### peterGuest

nntp.aioe.org wrote:
> 2 people own 1 house.
> one wants to buy the other ones half out
> The house is currently valued at 400k
> remaining on the mortgage is 190k
> How much should be offered to the other party to buy out exactly one half

Who has the mortgage?
If they have joint ownership of the house and have jointly taken out the
mortgage, then they each currently have 105k net equity in the house.
If the house is valued at 400k, the person should offer 200k to buy out the
other half. The person selling would pay off their half of the mortgage
(95k) leaving them with their half of the net equity (105k).

HTH

Peter

peter, Feb 28, 2008
6. ### nntp.aioe.orgGuest

nntp.aioe.org wrote:
> Maths time
> My brain is just not working and my answer seems wrong..
>
> 2 people own 1 house.
> one wants to buy the other ones half out
>
> The house is currently valued at 400k
> remaining on the mortgage is 190k
>
> How much should be offered to the other party to buy out exactly one half
>
> My answer was \$295k but it just doesnt feel right
>
> My other question is to buy out someones half, Do you go by current
> market house rates, OR do you just work it on the original borrowed amount?
> how do these things work.
>
> i believe the house was purchased for \$220k

i came up with \$295 from:
half of whats already been paid + remaining mortgage = 105k +190 = 295
400-190=210
210/2 = 105

if based on purchase price
half of whats been paid already 220k - 190k = 30k
\$30k plus remaining mortgage
\$15k + 190 = 205k

nntp.aioe.org, Feb 28, 2008
7. ### EMBGuest

nntp.aioe.org wrote:
> EMB wrote:
>> nntp.aioe.org wrote:
>>> Maths time
>>> My brain is just not working and my answer seems wrong..
>>>
>>> 2 people own 1 house.
>>> one wants to buy the other ones half out
>>>
>>> The house is currently valued at 400k
>>> remaining on the mortgage is 190k
>>>
>>> How much should be offered to the other party to buy out exactly one
>>> half

>>
>> \$200K and take over the mortgage if current value is what is agreed as
>> the "value" of the house.

>
> interesting, Can you tell me how you reached that number? - basically if
> i pass on the message i will be asked why that amount
>

Yeah - I had a major brain fart (shouldn't talk on phone and post at
same time). It's so wrong as to be laughable. \$105K and take over the
equity, although the actual amount should be less to take into account
the costs involved in doing the sell and split I mentioned in my last
post. Somewhere between \$90K and 95K is probably in the right region.

EMB, Feb 28, 2008
8. ### nntp.aioe.orgGuest

peter wrote:
> nntp.aioe.org wrote:
>> 2 people own 1 house.
>> one wants to buy the other ones half out
>> The house is currently valued at 400k
>> remaining on the mortgage is 190k
>> How much should be offered to the other party to buy out exactly one half

>
> Who has the mortgage?
> If they have joint ownership of the house and have jointly taken out the
> mortgage, then they each currently have 105k net equity in the house.
> If the house is valued at 400k, the person should offer 200k to buy out the
> other half. The person selling would pay off their half of the mortgage
> (95k) leaving them with their half of the net equity (105k).
>
> HTH
>
> Peter
>
>

Its tricky to get my head around it, But i believe you are saying that
the person buying the house out would need a \$295k mortgage to complete it

I think you have said exactly what EMB has said on his second go, In
completely different words

nntp.aioe.org, Feb 28, 2008
9. ### peterGuest

nntp.aioe.org wrote:
> peter wrote:
>> nntp.aioe.org wrote:
>>> 2 people own 1 house.
>>> one wants to buy the other ones half out
>>> The house is currently valued at 400k
>>> remaining on the mortgage is 190k
>>> How much should be offered to the other party to buy out exactly one
>>> half

>>
>> Who has the mortgage?
>> If they have joint ownership of the house and have jointly taken out the
>> mortgage, then they each currently have 105k net equity in the house.
>> If the house is valued at 400k, the person should offer 200k to buy out
>> the
>> other half. The person selling would pay off their half of the mortgage
>> (95k) leaving them with their half of the net equity (105k).
>>

> Its tricky to get my head around it, But i believe you are saying that
> the person buying the house out would need a \$295k mortgage to complete it

Yes
The person buying is buying half the house. If the house is valued at 400k,
it means they need to find 200k to buy the other half. If they fund this
by mortgage (ie a 200k mortgage), and they already have 95k mortgage (half
of the existing 190k mortgage), then they will end up with 295k mortgage.

The person buying will have their original 105k equity, and the rest of the
house is funded by mortgage (295k).

HTH

Peter

peter, Feb 28, 2008
10. ### Smoking Causes Lung Cancer (SCLC)Guest

On Thu, 28 Feb 2008 21:22:15 +1300, nntp.aioe.org wrote:

> Maths time
> My brain is just not working and my answer seems wrong..
>
> 2 people own 1 house.
> one wants to buy the other ones half out
>
> The house is currently valued at 400k remaining on the mortgage is 190k
>
> How much should be offered to the other party to buy out exactly one
> half
>
> My answer was \$295k but it just doesnt feel right
>
> My other question is to buy out someones half, Do you go by current
> market house rates, OR do you just work it on the original borrowed
> amount? how do these things work.
>
> i believe the house was purchased for \$220k

If the house is valued at \$400K, and it is owned by two persons, then to
each it is worth \$200K.

--
Smoking Causes Lung Cancer

Franklin D Roosevelt: "We have always known that heedless self-interest

Smoking Causes Lung Cancer (SCLC), Feb 28, 2008
11. ### David EmpsonGuest

nntp.aioe.org <> wrote:

> Maths time
> My brain is just not working and my answer seems wrong..
>
> 2 people own 1 house.
> one wants to buy the other ones half out
>
> The house is currently valued at 400k
> remaining on the mortgage is 190k
>
> How much should be offered to the other party to buy out exactly one half

The person buying out the house will take over the entire mortgage (or
refinance it), and will pay the other party their share of the equity in
the house, based on its current value (or an agreed value).

At present, the equity is 400k - 190k = 210k.

Halve all the numbers (since there are two parties): each party has 105k
equity and owes 95k on the mortgage.

The party keeping the house will need to pay the other party 105k, and
will also have to cover the entire mortgage.

I expect this is typically done by refinancing the mortgage, which means
a 295k mortgage, of which 190k is used to pay off the original mortgage
and 105k is paid to the other party.

> My answer was \$295k but it just doesnt feel right

That's the total mortgage plus the other party's equity in the house.
Definitely not paying that much to the other party!

> My other question is to buy out someones half, Do you go by current
> market house rates, OR do you just work it on the original borrowed amount?
> how do these things work.

Intuitively, I would consider it the same as selling the house: the
parties must agree to a fair market value.

If you based it on the original purchase price then the other party
would be seriously out of pocket. The person buying the house would be
paying less to own the house and could immediately turn around and sell
it for a huge profit.

Think of it in terms of the alternative option, which is to sell the
house and split the proceeds 50/50. The party being bought out should
end up with the same amount of money (apart from the lack of competition
with other buyers pushing up the sale price).

--
David Empson

David Empson, Feb 28, 2008
12. ### grumGuest

nntp.aioe.org wrote:

>
> My other question is to buy out someones half, Do you go by current
> market house rates, OR do you just work it on the original borrowed amount?
> how do these things work.
>

Here's a different take on working out the price. 2 people (A and B) own
1 thing in equal shares. A wants out of the partnership (but not
neccessarily out of ownership of the thing, they may want to own it
completely). A chooses a price, B then decides whether they will buy or
sell at that price. That's it. Cruel but fair.

Consquently, if B thinks the price is good, they will choose to sell.
However if B thinks the price is too low, they would choose to buy, even
if they don't want to keep the thing, because they believe can sell it
on the open market for a profit.

So A needs to choose their price very carefully, based on whether they
want to end up owning the thing completely, or want to be rid of it.
It's nicely self-regulating, and takes care of all the other issues like
transaction costs etc because A has to take those into account.

grum, Feb 28, 2008
13. ### Chris SherlockGuest

Based on your figures, the market value of the house is 400k, of that the
bank owns 190K, so between the two of you, you own 210K ot the total. Half
of that is 105k. This is what you would fairly pay to buy out the other
person. Of course, you'd be left footing the payments on that 190k mortgage
all by yourself.

Regards, Chris

"nntp.aioe.org" <> wrote in message
news:fq5qvo\$cqd\$...
> Maths time
> My brain is just not working and my answer seems wrong..
>
> 2 people own 1 house.
> one wants to buy the other ones half out
>
> The house is currently valued at 400k
> remaining on the mortgage is 190k
>
> How much should be offered to the other party to buy out exactly one half
>
> My answer was \$295k but it just doesnt feel right
>
> My other question is to buy out someones half, Do you go by current market
> house rates, OR do you just work it on the original borrowed amount?
> how do these things work.
>
> i believe the house was purchased for \$220k

Chris Sherlock, Feb 29, 2008
14. ### ~misfit~Guest

Somewhere on teh intarweb "grum" typed:
> nntp.aioe.org wrote:
>
>>
>> My other question is to buy out someones half, Do you go by current
>> market house rates, OR do you just work it on the original borrowed
>> amount? how do these things work.
>>

>
> Here's a different take on working out the price. 2 people (A and B)
> own 1 thing in equal shares. A wants out of the partnership (but not
> neccessarily out of ownership of the thing, they may want to own it
> completely). A chooses a price, B then decides whether they will buy
> or sell at that price. That's it. Cruel but fair.
>
> Consquently, if B thinks the price is good, they will choose to sell.
> However if B thinks the price is too low, they would choose to buy,
> even if they don't want to keep the thing, because they believe can
> sell it on the open market for a profit.
>
> So A needs to choose their price very carefully, based on whether they
> want to end up owning the thing completely, or want to be rid of it.
> It's nicely self-regulating, and takes care of all the other issues
> like transaction costs etc because A has to take those into account.

Excellent reasoning. This process may need to happen before the other
processes mentioned elsewhere.
--
Shaun.

~misfit~, Mar 2, 2008
15. ### Frank FlintstoneGuest

"shane" <-a-geek.net> wrote in message
news:fq5s24\$s2g\$...
> nntp.aioe.org did scribble:
>
>> Maths time
>> My brain is just not working and my answer seems wrong..
>>
>> 2 people own 1 house.
>> one wants to buy the other ones half out
>>
>> The house is currently valued at 400k
>> remaining on the mortgage is 190k
>>
>> How much should be offered to the other party to buy out exactly one half
>>
>> My answer was \$295k but it just doesnt feel right
>>
>> My other question is to buy out someones half, Do you go by current
>> market house rates, OR do you just work it on the original borrowed
>> amount?
>> how do these things work.
>>
>> i believe the house was purchased for \$220k

>
> 105k
> 400k/2 - 190k/2
>

The other thing to consider is the agents fees that would normally be paid
if the 2 parties were selling the house. Say for example these were \$10,000.
Each party would pay half these or \$5000, so this should come off the 105k
leaving 100k.

Or another way of looking at it is the house is worth 400- 10 = 390k. Take
away the 190k for the mortage = 200k.

Halve this and you get 100k

Frank Flintstone, Mar 2, 2008