Column One:
Eye on Unmarried America

October 15,  2007  



Advice for friends buying a home together

By Thomas F. Coleman


Although 38 percent of recent home buyers are unmarried, fewer single people are now able to purchase a piece of the American dream: home ownership.

Especially in places like Southern California where an entry level home costs $500,000, just how many individuals have the income to qualify for the monthly payment of a mortgage of more than $400,000?  Not many.

So for many single people who insist on a house rather than a less-expensive condo, the only entry into home ownership is through buying one jointly with a friend or relative.  But then there are risks if the plan turns sour down the road a bit.

A recent story on talks about the pro's and con's of buying a house with a friend.  In the story, real estate expert Barbara Corcoran offers some tips to single people who are considering joint ownership with a friend.

The upside:  You can get into the real estate market sooner than if you went solo.  You can split all the costs, share utilities, maintenance and chores, plus you get to live with a friend.

The downside: If there are any credit problems, your friend's financial troubles could become yours, too. Plus, you might find yourself cleaning up after someone you don't love.

Here are six specific pieces of advice that Corcoran suggests.

1. Have an open conversation before you sign a contract.

Talk about what each of you will be able to contribute financially.  Discuss your expectations of each other.  Probe each other's credit histories. Obtain credit reports.

"Remember that one person's bad credit can make the mortgage rate significantly higher," Corcoran warns.  "Also, any outstanding debt or unpaid loans can be later filed as a lien against your property. "

2. Hire an attorney.

If you want to do it right, you should have two separate written agreements: the property agreement and the cohabitation agreement. an attorney will know which points to cover in each contract.

3. Put everything in writing.

Create a detailed document which outlines your original intention.  This will help avoid confusion in the future.  "Friendship can easily turn to warfare," Corcoran points out.

4. Make a property agreement.

This document determines who owns the house and whose name is on the deed. Corcoran suggests that both names should be on the mortgage and the deed.

The property agreement also specifies who pays what towards the down payment and mortgage. In addition, it determines how the appreciation will be shared and how capital gains will be divided.

And don't forget, Corcoran reminds, you should buy the house as "tenants In common." This type of ownership provides the most protection for each party and the greatest amount of clarity.

5. Draw up a cohabitation agreement.

Just like a pre-marital agreement , this document covers what happens if you part ways.  Corcoran suggests that you include items like getting an independent appraisal to establish value, giving three-month's notice, and allowing each person the first option on the other partner's interest.

It should also include who contributes what to mortgage payments and repair costs and who gets the tax deductions for the property taxes and mortgage interest.

6. Buy term life insurance.

You or your friend could die before the property is ultimately sold.  So Corcoran advises that you should buy a term life insurance policy and name the other as beneficiary. In the event of death, the whole mortgage will be paid off by the insurance policy.


To read other editions of Column One, click here.

Unmarried America 2007

Thomas F. Coleman, Executive Director of Unmarried America, is an attorney with 33 years of experience in singles' rights, family diversity, domestic partner benefits, and marital status discrimination.  Each week he adds a new commentary to Column One: Eye on Unmarried America. E-mail: Unmarried America is a nonprofit information service for unmarried employees, consumers, taxpayers, and voters.