Sharing home buying deeds
Are you thinking about buying a home with someone unrelated to you? Before you sign anything, experts say, there are certain precautions you'll need to take to keep the roof from caving in on your dream.
Pooling resources with friends, lovers or partners to come up with a down payment or the purchase price of a home is increasingly popular today. But now that you have the money, you and any partners face some tough decisions, starting with the deed.
First decide what kind of deed to have. If nothing to the contrary is stated on the deed, the property is owned as by tenants in common. With this kind of deed, there can be multiple partners, each owning a different percentage of the property. Partners can also transfer their portion of the property to anyone at any point, without the permission of the other owners.
In reality, however, if the partners disagree, it's hard to sell part ownership in a home to a third party. Few people want to buy a home if they don't have complete control of it. More likely to happen is that if one partner won't buy the other out, a partition action is filed in court. A judge then orders a sale, which usually nets the partners less than the home's market value.
If the deed is tenants in common, problems can also occur when a partner dies. The deceased's share goes to the person or persons designated in the partner's will.
But if there is no will, the share goes to the deceased's relatives, who are entitled to the estate under New York State law. This can result in an original partner owning a home with a stranger or even multiple new partners.
If a partner wants his or her share in a property to go to the surviving partner in case of death, the deed should be written as joint tenancy. Then, no matter what a will says, the surviving partner or partners receive the deceased's share.
Even after you decide what kind of deed to draw up, partners purchasing property together should also draw up a formal agreement, spelling out such things as how much interest each has in the property, who pays what expenses connected with the house and what happens if one partner is unable to pay their share. In the latter case, for example, the agreement might call for the delinquent payer's proceeds to be reduced in the event of a sale, she says.
Many people, of course, never plan for problems, so they leap into the purchase "without looking at all the angles". But if everything is examined, potential problems can be addressed in the agreement. Here are some examples:
One way some partners who own the property as tenants in common have solved the problem of transfer in case of a death is for each to take a term life insurance policy for half the value of the home. If one partner dies, the deceased's heirs are left the property's value in cash.
Engaged couples purchasing a home prior to marriage should have a prenuptual agreement, spelling out who put up what money to buy the home and what happens to the house if the engagement is broken.
Such agreements may seem cold-hearted, "But when love goes sour, it can be a nightmare." Even if one partner moves out, both are still liable for the outstanding mortgage balance when both names appear on the note. Sort of like the sound of a roof caving in on a dream.
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