By: Jeffrey Apell, Esq.
At 16 percent, unmarried couples made up the largest percentage of first-time home buyers last year than they have since 1981, according to the annual National Association of Realtors report.
Many couples don’t realize just how risky it can be to buy a home without being legally tied together. A real estate attorney can help guide an unmarried couple through the careful planning, necessary steps, and even the uncomfortable-but-necessary conversations that can promote a mutually beneficial outcome regardless of what the future holds.
Enter in to an official agreement
If you were entering into a business with your neighbor, wouldn’t you want to have an agreement to protect yourself in the event that the partnership or business failed? The same reasoning applies here. It may not be easy or comfortable, but you and your significant other need to tackle some questions: what happens to the property if you split? What happens if one of you becomes disabled or passes away? Who pays for utility bills or for major repairs?
Just like entering into a business with your neighbor, you and your significant other need a written, legally-binding document. Oral or hand shake agreements are often not upheld if things go south, and having a plan in place that you both have already agreed to can make a difficult time less stressful. Purchasing a home together enters both of you into a different kind of partnership. At minimum, you need some kind of “co-ownership agreement” that answers these questions. Also keep in mind that prenuptial agreements aren’t just for the very rich, and might be the right option to protect your own best interests as well as your partner’s.
Select a type of title
A real estate attorney can outline all of your options along with their pros and cons so you can choose what type of title is right for you. Some types of titles include:
- A sole ownership title puts the entire property into one person’s name.
Pro: If there’s a large disparity between your incomes, this may be a good option for tax reasons.
Con: Does not create an ideal situation if relationship ends.
- Joint tenancy as tenants in common lists both partners on the title.
Pro: Ownership shares do not have to be 50/50 with this kind of title, so shares can be tailored to each partner’s financial contributions.
Con: If somebody passes away, that person’s share does not automatically go to the other partner: generally, it goes to the estate of the deceased partner.
- Joint tenancy with right of survivorship circumvents the problems of joint tenancy as tenants in common by putting the names of both partners on the title, and if one partner dies, the surviving partner can remain on the property.
Pro: This option will protect both of you in the event that one of you passes away.
Con: Creates a difficult situation if you break up, one of you cannot buy out the other, and no other agreement is in place.
Your specific situation may require a different kind of solution, so it’s important to talk to an experienced real estate attorney to discuss and evaluate each of your options.
Simplify the process by keeping it between you and your partner
This is not exclusive to unmarried couples, but in general and particularly with younger unmarried buyers, parents often want to be part of the process. While the support of family is unquestionably important, you may want to consider (gently!) asking mom and dad to stay home to avoid confusion and additional stress.
The real estate team at Posternock Apell, PC can discuss all of your options with you to ensure you make a choice best suited to your needs, your significant other’s needs, and your situation. Call (856) 642-6445 to find out how.