Sunday, August 22, 2004
singles buying houses together
A story published today in the Los Angeles
Times reports that more single people are breaking into the home ownership
market by joining together with friends to buy a house together.
example, consider Donna Edmonds who thought she had realistic expectations
when she started looking two years ago for a $500,000 house.
"I just wanted a place on the Westside that was not worse than my
apartment," said Edmonds, who was outbid by $30,000 to $60,000 each time
she made an offer.
After commiserating with friend and neighbor Debbie Basch, who was
house-hunting in the same price range, the two decided to try co-buying a
duplex so that they could broaden their search to $1 million.
"We've both been looking for such a long time," Edmonds said. "It's the
kind of market where you have to do something different, rethink the
Since the two combined forces a few months ago, Edmonds said they are
feeling more hopeful about finding a place because there's more available
in their new price range.
Edmonds and Basch are among single house-hunters in the Los Angeles area
eager to get in on the real estate market. Linked by friendship and
bidding-war stories rather than family ties, they are pooling their
resources and buying properties together.
"Buyers are getting any leg up on the market they can, and they feel that
the sooner they do it, the better," said Betty Graham, president and chief
operating officer of Coldwell Banker Residential Brokerage in Los Angeles.
Only 18% of households in the state could afford to buy a median-priced
house in June this year, compared with 27% in June of last year, according
to the California Assn. of Realtors. A rise in rates could reduce the
number of eligible home buyers even further.
"Entry into the market without equity or a large amount of cash is really
difficult," said Josh Breaux, a Prudential Realty broker in Encino who has
had several recent clients, novice house-hunters, who were exploring
First-time buyers are also vying for fewer homes. Since January, housing
inventories have averaged at or below two months in Los Angeles County,
reaching an all-time low in March of 1 1/2 months. The inventory measure
indicates the number of months it would take to sell all homes on the
market at the current sales rate. The long-term average is 10 months.
"Because of the low rates and the improved technology for approving
loans," said Robert Kleinhenz, deputy chief economist for the California
Assn. of Realtors, "we're looking at a larger pool of qualified applicants
at the same time that current inventories are at an all-time low."
Competing with dual-income households under these conditions can be
daunting, prompting some single buyers to team up with a friend.
"I was 31, so I was thinking, 'I really need to invest,' but I wasn't even
looking around here because I didn't think I could afford it," said Kelly
Cheston, who bought a three-bedroom house in Lake Balboa with friend Dana
Mazzochi this year. Cheston was inspired to house-hunt by Mazzochi, who
was looking at townhouses in Las Vegas because she could not find anything
in Los Angeles in her $160,000-to-$200,000 price range.
Although they were outbid on houses in their first-choice areas of North
Hollywood and Valley Village, they both said they were confident with
their purchase of a home in Lake Balboa for $374,500.
"You may have to buy on the fringe," Cheston said, "but buying in L.A. is
still a smart investment."
Other buyers have found that co-owning has allowed them to upgrade their
living standards significantly. Robert Setari was looking for a house in
the $800,000-to-$1-million range when his friend Ray Nettles suggested
they pool their capital and buy something together.
Their combined resources allowed them to buy a home for $1.8 million.
"We found this gorgeous house" in the Hollywood Hills, said Setari, who
moved in March. "We just couldn't believe we got it."
The 10-year-old, five-bedroom traditional was owned by the band the
Scorpions. Setari and Nettles are renovating to create a more contemporary
three-bedroom bachelors' house.
Owning and working on the house has brought the two friends closer, Setari
said. "It's like having a roommate you're renting with, but it's better.
We're sharing ideas about what to do with the kitchen and outside; we're
talking about all the barbecues we're going to have. It's great."
But co-buyers warn that it is not a commitment to make hastily.
"You have to do it with someone you trust completely," Mazzochi said.
"Kelly and I have known each other for a number of years, and we had very
good credit, so we could do 100% financing."
Cheston and Mazzochi do not have a legally binding contract spelling out
the terms of their 50-50 co-ownership, but both say they feel bound by
their mortgage agreement, which imposes a prepayment penalty if dissolved
during the first three years of the loan.
"We're in this for three years together," Mazzochi said. "After that, if
one of us gets married or wants to move, they can buy the other out or we
Lawyers suggest, however, that the commitment involved in buying property
together warrants a legal agreement.
"You never know what people will want to do, so it's always good to have
some kind of contract that deals with how they hold title to the property
and their exit strategy in case someone wants to sell early," said Phil
Nichols, a lawyer and partner at Pircher, Nichols & Meeks in Los Angeles.
Even though it's likely the co-owners will be friends, Nichols said, they
also need to recognize that they are investment partners.
"You have to deal with what happens when one person fails to put up money
for the mortgage payment," he said. "What rights does the other party
It is also important to recognize that one owner may want out earlier than
Because of the potential for these types of complications, some singles
who have considered co-buying have ultimately shied away from it. Ted Sun
had been looking at condos for several years when he considered co-buying
with a friend.
"I knew we could get something nicer than a condo — a duplex that we could
split," said Sun of Mar Vista.
After looking for a few months in West L.A., however, Sun decided the two
should not invest together because they would not have been equal
investors, a relationship that made him apprehensive.
"He would have put a lot more money down but couldn't make high monthly
payments. I didn't have much to put down, but I could make high payments,"
Sun said. "I haven't ruled out finding someone else, but this just wasn't
the right person."