Advantages & Disadvantages of Selling an Ownership Interest
For just about any item of value, at least one individual has an ownership interest. This person has the right to make decisions concerning the property. If you find yourself in a position where you have the option to sell your ownership interest in a piece of property, take the time to weigh both the pros and cons of this decision.
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Identification
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An ownership interest is a percentage of ownership in an asset (an item of value). For instance, a business is a valuable entity that has one or more owners --- each with an ownership interest in the company. When two or more people buy a home jointly, each one has an ownership interest in the property. Each individual maintains rights to the asset up to her share of ownership, and can sell that share to a willing buyer if she chooses. Selling an interest in an asset is commonly referred to as a buyout.
Advantages
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The main advantage of selling an ownership interest is that you are no longer responsible for the asset in question. You do not have to pay obligations or manage problems related to the property. For example, if you have an ownership interest in a rental property, you are partially responsible for repairs and complaints from tenants. But when you sell the interest, you no longer have to respond to these issues. Selling an ownership interest eliminates the risk related to the asset.
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Disadvantages
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The main disadvantage of releasing an ownership interest is that you can no longer receive future residual income from the asset. Holding onto the asset could generate more income over time than the price of selling it now. Losing the ownership interest in an asset of value also reduces your net worth. In some cases, selling an ownership interest is complex, time-consuming and involves intense negotiations between the buying and selling party.
Considerations
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To officially sell an ownership interest, especially in the case of real estate or a business, you must sign a formal agreement with the other party. For a business the contract is a called a buy-sell agreement, which outlines the percentage of business ownership and the price of the sale, as well as information about both the previous and new owners. For joint ownership of real estate, the terms of selling the ownership interest are outlined in the initial co-ownership agreement. You (the seller) and the new buyer must sign a sales agreement and contact the county property records office to officially change owners. However, the other owner may have preference over a third party for buying out your interest. In either case, it is wise to get the help of a lawyer.
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