My Shared HomeA fair sibling buyout starts with one formula: appraised market value, minus anything owed on the property, equals the equity — divided by ownership shares. The buyer pays each departing sibling their share, in cash or through a seller-financed note at no less than the IRS minimum rate (4.98% long-term for July 2026).
Nobody wants to be the one to bring up money — least of all over a house a parent just left behind. But an unspoken number is harder on a family than a spoken one, because everyone privately fills in their own. This page gives the number somewhere neutral to live: the standard formula, a calculator to run it with real figures, and the seller-financed path many families never hear about.
How do you calculate a sibling buyout?
Estate attorneys, mediators, and courts all start from the same short formula: appraised fair market value − outstanding mortgage and liens = equity. Each owner's buyout price is their share of that equity — not of the sale price, and not of the original purchase price. Here is the classic three-sibling case:
| Step | Amount |
|---|---|
| Appraised fair market value | $600,000 |
| Outstanding mortgage | − $150,000 |
| Equity | $450,000 |
| Each sibling's share (3 equal owners) | $150,000 |
| Cash to buy out two siblings | $300,000 |
Two practical notes. First, the mortgage does not vanish: the buyer usually refinances the property into their own name at closing, which pays off the old loan (so departing siblings come off the note) and can raise the buyout cash in the same transaction. Second, the deed transfer itself is ordinary paperwork — a title company or real estate attorney handles it, and no agent commission applies to a family transfer.
What would the buyout cost with your numbers?
Some families choose to discount the appraised value by the agent commissions and closing costs an actual sale would have consumed, on the theory that no one would have netted full market value. Others feel the buyer keeps the whole house and should pay full price. There is no rule — decide together and write it down.
Enter an appraised value above to see the split.
These amounts cover the departing siblings' equity only. Any existing mortgage stays with the house — the buyer typically refinances it into their own name at the same time.
The seller-financed alternative
If the departing siblings carry an installment note instead of taking cash, at 4.98% annual — the July 2026 long-term Applicable Federal Rate — the numbers look like this:
The IRS resets AFRs every month, and the minimum rate depends on the note's term — see the current rates and tiers at the Family Matters AFR page.
The numbers behind this calculator (July 2026)
- The buyout formula: fair market value − mortgage and liens = equity; equity × each owner's share = that owner's price.
- Long-term AFR, July 2026: 4.98% annual — the IRS minimum rate for family notes longer than nine years, per Rev. Rul. 2026-12.
- Mid-term AFR, July 2026: 4.35% annual — the floor for notes over three and up to nine years (same ruling).
- AFRs reset monthly — always check the current month's ruling before signing a note.
What if nobody agrees on the value?
Value disputes sink more sibling buyouts than money does, because each side quietly anchors on a different number — one remembers what the neighbor's house sold for, another remembers what Dad paid. The neutral fix is a licensed appraisal. Some families jointly order one appraisal and agree, in advance and in writing, to be bound by it. Others have the buyer and the sellers each order their own and average the two, bringing in a third appraiser only if the first two land far apart. What matters less is which method you pick; what matters is picking the method before anyone sees a number.
An online estimate is a conversation starter, not a valuation — it has no comparable-sale analysis behind it and no one stands behind it. For an inherited house, the estate may already hold an appraisal from the date of death; if meaningful time has passed, most families re-appraise, since the buyout should reflect what the house is worth now. Date-of-death value still matters for the sellers' cost basis, so have a CPA in your state confirm how both numbers get used.
Can a sibling finance the buyout instead of paying cash?
Yes — and for many families it is the difference between a buyout and a stalemate. The departing siblings act as the lender: the buyer signs a promissory note, secured by the house, and pays it down monthly like any mortgage. The siblings earn the interest a bank would have earned, and the buyer avoids a cash-out refinance at retail rates.
The one hard rule: charge at least the Applicable Federal Rate for the note's term. Below the AFR, the IRS can treat the foregone interest as imputed — effectively a gift from the lending siblings to the buyer, with tax paperwork to match — so a family discount on the rate is rarely worth it; discount the price instead if generosity is the goal. This is squarely CPA territory, so confirm the structure with one in your state. The Family Matters family loan calculator picks the correct AFR tier for any term and shows the full payment schedule.
What if a sibling won't sell — or won't agree at all?
Any co-owner can generally file a partition action asking a court to divide or sell the property — and in many states the Uniform Partition of Heirs Property Act now gives the other co-owners a right to buy out the filer's share at appraised value before a forced sale. It is worth knowing this exists, not as leverage but as perspective: courts resolve deadlocks with an appraisal and the same equity math on this page, minus legal fees and minus the relationship. If talks have truly stalled, that is an attorney conversation in your state — and often the mention of a mediator gets everyone back to the table first.
How do you keep the buyout fair on paper?
Whatever the family decides, write it down while everyone still agrees: the appraised value and how it was set, any selling-cost offset, each share, the note's rate and term, and every payment made. Memory is the least reliable ledger in any family, and most buyout resentments trace back to a number someone recalls differently.
The same is true of the months — sometimes years — of co-ownership before a buyout closes, or after a family decides not to buy anyone out at all. Someone pays the insurance, someone covers the furnace repair, and the running total lives in one sibling's head. The Shared Home module from My Shared Home records each expense the moment it happens and keeps a running who-owes-what everyone can see, alongside the stays calendar, maintenance from photo-flag to fixed, and professional home-watch visit reports. Money still moves between siblings the way it always has — what changes is that the record is shared, current, and nobody's burden to keep.
If the family keeps the house together, put the rest of the rules on paper too: a family agreement covers use, costs, and exits, and some families go further with a trust or LLC to hold title. And for the ongoing cost split itself, the cabin expense split calculator covers the fair-share question this page leaves off.
Frequently asked questions
How is a sibling buyout usually calculated?
Appraised fair market value minus the outstanding mortgage and liens equals the equity; each sibling's buyout price is their ownership share of that equity. With three equal owners of a $600,000 house carrying $150,000 of debt, each share is worth $150,000.
Do I need a real estate agent to buy out my sibling?
No. A family transfer has no listing and no commission — a title company or real estate attorney prepares the deed and handles closing. That saved commission is exactly why some families apply a selling-cost offset to the appraised value, though plenty choose not to.
What interest rate do I have to charge my sibling on a buyout note?
At least the Applicable Federal Rate for the note's term. For July 2026 that floor is 4.35% annual for notes of three to nine years and 4.98% for longer notes, per Rev. Rul. 2026-12. The IRS publishes new rates every month, so use the rate in effect when the note is signed.
Does buying out a sibling from an inherited house trigger capital gains tax?
Possibly for the selling siblings, though inherited property generally takes a stepped-up basis at the date of death, so a sale soon afterward often produces little or no gain. The longer the gap and the more the house appreciates, the more this matters — confirm with a CPA in your state before closing.
Can one sibling be forced to sell an inherited house?
In most states a co-owner can petition a court for partition, which typically ends in an appraisal-based buyout or a sale. Many states' heirs-property laws first give the family a chance to purchase the petitioning sibling's share at appraised value. This is a question for an attorney in your state, and usually a reason to try mediation first.
Co-owning until the buyout closes?
The Shared Home module keeps the in-between months fair on paper: every expense recorded the moment it happens, a running who-owes-what, a shared stays calendar, and maintenance tracked from photo to fixed.
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