Buying a home with friends
Buying a home with friends
September 14, 2011
It is possible for two friends who wish to stop renting and own a home to consider buying one together. The obvious advantage is that multiple owners spread the cost out and can allow them to share a nicer home than either could afford individually.
Many who think about this option may be experienced renters but first-time home buyers, and as a result not understand the complications buying a home together can introduce. For example, experienced real estate lawyer James Grossman told the New York Times that the home’s title is a major concern.
Title and ownership
When a married couple purchases a home, they can be confident that any decisions to buy or sell the home will be mutual. When two friends purchase a home, they generally hold title as tenants in common, which allows either one to sell his or her partial ownership at any time.
Grossman pointed out that when two friends own a home, one may choose to move out to live elsewhere, either for personal reasons or to seek a new job. When that happens, he or she will likely wish to sell. If the remaining owner wishes to have the right to refuse a potential housemate's move or the opportunity to buy out a departing co-owner, that should be determined in advance, Grossman indicated, in a written agreement.
Another expert similarly emphasized the importance of a written agreement to MSN Real Estate, but noted home buyers should not expect an agreement to compensate for a poor choice of partner. Friends, he indicated, should have a sense of each others' financial responsibility before making such a significant investment together.
Planning ahead
Agreements should be specific, covering factors like how much of the down payment and mortgage payments each owner will be responsible for and how appreciation and capital gains will be apportioned, MSNBC suggests.
Commercial real estate attorney Julie Panaro told MSN Real Estate that when buying, friends should consider how long they intend to stay in a home, recommending that they not expect to live there after five years, in general, and recommending that they choose homes which can be resold without significant repairs.
One co-owner noted friends should be prepared for the business relationship that results as well as the social one, and should not enter into joint ownership unless certain they can both get along and remain fiscally responsible.