Profit sharing

[Codeman]

I need a formula for the following;

Two people buy a house and own it for many years. One decides to split and
the other continues the payments on the house until sold to someone else at a
later date. How do you determine the profit split between the two at the
time of sale knowing that the one staying in the house should get a larger
portion of the profit if any profit is aquired?

Assume:
A. = number of years the two paid on the house as a couple.
B. = number of years/months or days the one who stayed in the house made the
mortgage payments after the split.
C. = profit after all closing cost and sale of the house.
D. = profit to the one who stayed the shortest time in the house
E. = profit to the one who stayed the longest time in the house.

I will convert days to decimal equivalent in years when number of days is
between or less than a year.

Thank you for any help.

 

[Don Guillett]

Homework?

 

[jatman]

you owned the house for 10 years (8 with the spouse, 2 on your own)
your spouse owned the house for 8 years

total ownership time is 18 years. 8/18=44.4% of share value; 10/18=55.5%
share value;

 

[Gord Dibben]

More like saving on divorce lawyer fees.


Gord

 

[L. Howard Kittle]

If you live in Oregon, then its pretty easy. You both get half! <BG>

 

[Joe User]

How do you determine the profit split between the two at the
time of sale

I assume you do not want a legal answer. That would depend on your
jurisdiction, any applicable law and legal precedents, the relationship
between the parties (e.g. married, separated, divorced, business partners, or
other) as well as subjective factors (e.g. the feelings of related parties).
In the US, one important factor will be if and when a quitclaim was filed by
the absentee party.

knowing that the one staying in the house should get a larger
portion of the profit if any profit is aquired?

That is not a certainly, no matter how you decide to split the profits.
Notwithstanding law to the contrary, I would expect to prorate the profits
based on some relative measure of co-ownership.

The simplest approach would be to prorate based on dates of ownership. If
A1 is the date when the house was purchased, A2 is the date when one party
"split", A3 is the date when the house was sold, and A4 is the profit, then:

A5, profit for the shorter-term owner: =ROUND(A4*(A2-A1)/(A3-A1),0)

A6, profit for the longer-term owner: =A4 - A5

Alternatively, you could prorate based on the percentage of costs or equity
paid by each party. I think most courts would use equity (if even that),
since costs other than mortage payments and interest are difficult to audit.
But even paid equity is considerably harder to compute; and it requires more
data than you provided.


Assume B1 is the total purchase price, B2 is the loan amount, B3 and B4 are
the total interest and payments made during the period of co-ownership, and
B5 and B6 are the total interest and payments made during the period of
single ownership. (B3:B6 can be computed from the terms of the loan, if is a
fixed-rate loan that was never refinanced.) For simplicity, I assume that
the up-front payment of equity (e.g. downpayment) was split 50-50%. Then:

B7, equity paid by the shorter-term owner: =ROUND(B4-B3 + (B1-B2)*50%,0)

B8, equity paid by the longer-term owner: =ROUND(B6-B5 + (B1-B2)*50%,0)

A5, profit for the shorter-term owner: =ROUND(A4*B7/(B7+B8),0)

A6, profit for the longer-term owner: =A4 - A5


----- original message -----

 

[Gord Dibben]

Geez.....half would have been nice.

I will admit though, she generously allowed me to keep ALL the mortgage and
credit card payments.


Gord

 

[Codeman]

Thank you all for your input. 30-years down the tubes. We have not owned
the house that long. I keep my stuff and money and she keeps hers. Unlike
most splits the man is not getting the shaft. She is wanting the big D not
me but if she has been unhappy for over 13-years then she can go. I am not
living with a women who is not in love but only loves me because I am the
father of the kids. Thank god my kids are grown.

 

[Don Guillett]

See, it IS homework.