Posts Tagged ‘Buying real estate with unrelated persons’

Since the slowdown of the real estate market in 2006, many homebuyers and investors are taking advantage of the buyers’ market and purchase at a lower price. It is not uncommon for unmarried couple, or two roommates, or a group of friends to invest in a real property.

While the idea may seem on the surface like a good opportunity for renters who wish to become homeowners or investors looking for ways to capitalize on the current housing downturn, however there are many LEGAL problems and potential risks for unmarried/unrelated persons purchasing real estate together.

Most (not all) married couples purchase real estate either as Tenants by the Entirety ( in the states where it is allowed) or as Joint Tenants with the Right of the Survivorship – either way the surviving spouse is protected and the property is shared equally. The exception is the Tenancy in Common which does NOT automatically offer protection to the surviving spouse and owners can own unequal shares.

The mortgage obligations and the way title is taken can punish the participants to the transaction for years to come. This is especially true if all co-owners are on the title, but only some sign the mortgage – in case of default all co-owners who are on the title are responsible for the mortgage, however those who did sign the loan stand to loose more in terms of their credit rating.

This is why it is of utmost importance to have a well written, detailed legal agreement prepared BEFORE the property is purchased by a knowledgeable real estate attorney that clearly spells out all the terms of the agreement to co-own:

  •  how title to the property will be held
  • who owns how much of the property
  • what amounts were contributed
  • who is responsible for mortgage
  • what happens if the partnership dissolves
  • future repair and maintenance costs
  • HOA fees
  • utility costs and other expenses
  • who pays all the property taxes, unless the lender pays via escrow
  • how the tax deduction for the mortgage interest will be split
  • what happens if one or more of the co-owners abandons the property
  • what happens if one of the co-owners decides to sell or transfer his share
  • how the ownership arrangement will be dissolved
  • how the proceeds of the sale will be distributed

Choosing the way unmarried co-owners take the Title to the property depends greatly on the relationship of the co-owners:

  • Joint Tenancy with the right of survivorship
  • Tenancy in Common
  • Limited Liability Company

To read about various ways that Title to real estate property can be taken, visit May 2009 blog:


While there are many benefits to co-ownership, there are certainly risks as well. Married people have comprehensive divorce laws that offer legal guidelines in the event of split – those who purchase real property with non-spouse do not have that legal benefit and protection.

All the more reason to consult a real estate attorney and tax accountant BEFORE purchasing a property with siblings, friends, or other investors to protect interests of everyone involved. A well written, detailed agreement can save a lot of headache and legal fees in the future.



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