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Husband and wife together with mother buy a house $452,855 purchase price in 2005. Mother puts down $152,000 downpayment H&W hold mortgage of $300,855.Mother has 33.6% ownership and H&W have 66.4% ownership. In 2009 a refi gave mother $20,000 and H&W $20,000. Mother $152,000 minus $20,000 now gives her 29.1% ownership and H&W 70.9% ownership. 2015 house appraises at $400,000. Does Mother get $400k x 29.1% ownership for a buyout or is her percentage reduced to 26.35% because the value of the house went down?

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    What was the agreement up front? If in the first month, 100% of the equity was put in by her, why did she only own 33.6%? Do all parties live there? If not, do the parties that live in the house pay rent to the other? This really depends on what you agreed to. We can help you think about what might be fair if there was no agreement, but there's not a simple answer because money up front is more valuable than money paid in over time, and benefit received from use of the house should also be factored in. – Hart CO May 3 at 21:30
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    @HartCO I would treat the 33.6% she put down as her share. The fact that the H&W borrowed the other 66.4% is irrelevant as they put down that borrowed cash at purchase time just the same as if it was their own cash. Their agreement with the bank is separate , at least in my mind. – Michael May 3 at 22:21
  • @Michael Maybe if they all lived there, but if she doesn't live there that's a terrible deal. – Hart CO May 3 at 22:29
  • @HartCO well if she doesn't then definitely her 1/3 ownership should command 1/3 of the rent – Michael May 3 at 23:05
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    Was there an appraisal in 2009? I would say that the $20,000 constitutes a buyout of a portion of her share, the percentage of the buyout based on the value at that time. Alternatively it could be considered a refund of part of her original buyin, but in that case, probably interest should be applied. – prl May 4 at 3:34
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When these three people bought the house, they should have signed a document saying what fraction of the house each owns, and how it's value would be divided between them when sold. If they didn't then there may be a default division that is applied legally.

If it isn't defined in law or the agreement then it is up to them to decide how the value is split on sale. They can decide to do it however they want and whatever they think is fair. There is no "correct" way.

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