Choose a Co-Buyer Wisely
You’re probably taking the decision of which house to by pretty seriously, which is great. If you’re thinking about a co-buyer, who you choose is just as important. No one wants to move into their new house only to find out their housemate refuses to pay their way or wants to leave at a bad time. So try to choose someone you know can handle the responsibility.
Have a Plan in Writing
Don’t be shy about wanting an agreement, that is, an enforceable legal agreement specifying each buyer’s responsibilities in all the aspects of home ownership. It may feel impolite or too formal, but think of it as a way to protect everyone involved. Talk to a real estate attorney and work to have an agreement with your co-buyer before any mortgage paperwork is started.
Ownership and Title
These are the two major areas you’ll need legal advice and documentation for in a basic scenario. Home titles for co-buyers are normally either:
- Tenants in Common (TIC)
- Joint Tenants with Rights of Survivorship (JTWROS)
With TIC, the buyers can each hold different ownership shares of the house, and their share is treated like their property for inheritance purposes. With JTWROS, this is reversed so everyone gets an equal share but the other owners would inherit a deceased owner’s share. Unless a provision is added stating otherwise, any owner who is moving out can sell their share in the property to whomever they choose.
The Co-Buying Agreement spells out how the owners split the property by interest percentage and can contain various other provisions. These commonly address how expenses will be divided. Key expense items include:
- Mortgage payments
- Property tax
- Maintenance and repairs
Other important items include how selling and moving is handled, adding roommates and how property in the house is to be divided or shared. For example, if one party has the cash for a down payment, it might be agreed that they get a greater ownership percentage. Or if that isn’t desirable, the buyer with less cash on hand could agree to foot more of the bills. The agreement can be flexible enough to suit most any situation.
The co-buying approach may not be for everyone. But with proper planning in finding your co-buyer and setting up your agreement, it might be perfect for you to break into home ownership with a higher quality property than you thought you could otherwise get.
Jodi Bakst, Broker-Owner of Real Estate Experts, works with a highly trained team of strong buyer and seller agents serving Chapel Hill, Durham, Cary, Apex and Morrisville, North Carolina
June 21, 2016