Severing a partnership - what financial things to include?

[TangoWhiskey]

I'm meeting a lawyer tomorrow to start winding up a real estate partnership that's going south (I should have paid closer attention to their two divorces and another failed business partnership). One of us will buy the other out using a listing on the open market to help determine value along with an AACI appraisal process.



Is there anything else I should consider along with:



1 - getting a fair valuation of the real estate assets

2 - subtracting cost of realtor commission from the agreed-on real estate asset value

3 - ???



Is subtracting a realtor commission appropriate?



And since both of us are still on a newly issued CMHC mortgage as guarantors, how do we value that liability encumbering whoever sells? Is there a process to take people off a mortgage? This mortgage has been pooled and sold on the CMBS market.



Thanks as always, its been a while since I've needed to consult this great network.



Tris

 

[Thomas Beyer]

You should consider ALL costs as if sold in the open market: legal fees, realtor fees and mortgage discharge fees to arrive at fair value of the remaining equity.



Or you can just find a value mutually that both parties find acceptable. If not, sell it in the open market and eat all the costs.



There is no real good valuation of a mortgage guarantee, perhaps 0.5% to 1% of the mortgage amount annually, but that is at best a real bad guess. Ask yourself if someone else asked you to co-sign a mortgage: what would you charge for it [see chapter on red money in my book] ?

 

[TangoWhiskey]

Thanks - the whole episode had me consulting your book about partnerships given the one you cite frequently in it about the agressive expansion minded guy "Dave" - I'll have to go back and flip through it again looking for the red money chapter as I only remember the (very valuable) lessons about blue vs green money.



Vielen Dank!

 

[Thomas Beyer]

Some more on this here: http://myreinspace.com/public_forums/General_Discussion/61-29251-Blue_s_Red_s_and_Green_s_Why_the_real_estate_expert_deserves_to_make_some_money_too_.html



It is not specific on the price of debt or guarantees.



One option is to pay X for the equity and Y/year until guarantee is discharged.