Prepare a Written Contract of Sale

• To be enforceable, real estate transactions must be in writing. The majority owner and minority owner must enter into a contract that stipulates the terms of sale and consideration offered in the sale. For example, the contract must state the terms the majority owner is offering to buy ownership interest. This would be the price and terms of the transaction. There must also be consideration involved, meaning something of value must be exchanged in the transaction to make it a valid contract. This could be money or some other form of asset. The contract must be signed by both parties to be valid and enforceable.
  
  

Prepare the Transfer Deed

• To sell or transfer an ownership interest, a transfer deed must be used to convey title from one party to another. The most common form of transfer deed is a grant deed. This deed carries both an express and implied warranty that the person making the transfer is legally able to do so. The grant deed states that the minority owner is transferring the title to the majority owner. To be valid, it must be signed by the minority owner in front of a notary public and recorded at the county records office where the property being transferred is located.
  
  

Closing Escrow

• An escrow company should handle the transfer of real property to facilitate the exchange of money and title in a transfer involving real property. An escrow receives money from the majority owner and a transfer deed from the minority owner. When all documents pertaining to the transaction are signed, the escrow company authorizes the transfer deed to be recorded at the county records office, and upon recording confirmation, releases the funds received to the minority owner.
  
  

Considerations

• Any transfer involving an ownership interest in real estate may have tax consequences to both parties. The minority owner who transferred his interest for consideration may have a taxable event in the year the consideration is received. The minority owner's basis in the property will affect any gain or loss on the property. For example, if the minority owner initially invested $50,000 to buy his interest, if he sells his interest to the majority owner for $60,000, there might be a $10,000 capital gain on the transfer. When the majority owner buys out the minority owner, his basis for gain or loss on the property will be determined by taking his original basis in the property plus the cost of acquiring the minority owner's interest. For example, if his original interest was $100,000 and he bought out the minority owner for $40,000, his basis for gain or loss would be $140,000.