Teaming Up to Buy
The Home You Want

When Chris Kent, a 39-year-old public-relations consultant in San Francisco, tells friends from other parts of the country that she bought a home in the East Bay with a married couple, she gets a quizzical look.

"They think I'm talking about communal living," Ms. Kent says. "I get, 'How weird!' "

What she's describing, however, is an increasingly common form of home purchasing. Unmarried couples have for many years bought real estate together, sometimes before marriage, and sometimes with no such intention. However, like Ms. Kent, many single buyers are teaming up with other couples or friends to buy a primary residence. They figure it's the only way to get the kind of home they want in an expensive city, or a home that fits their needs.

Such buying has increased "over the last two years among people who aren't necessarily intimately involved," says Amanda Guerin, a real-estate agent with Zip Realty in San Diego. "A lot of people at the entry level can't afford to do it on their own."

According to the National Association of Realtors (NAR), home buying among pairs and groups of unmarried people is growing. NAR counts such buyers of primary residences separately, in a category called "unmarried," and has seen their share of the market climb from 5% in 1993 to a projected 8% this year.

For buyers like Ms. Kent, "cost is a huge motivator." On her own, she says, she could buy a "condo box" priced between $325,000 and $350,000 -- "a small place in a sketchy neighborhood." But by sharing a purchase with a couple she met through friends -- two media executives who had roughly her same credit rating -- the trio were able to buy an older home in the Oakland area that fell within their combined $500,000 budget. The home had previously been divided and reclassified as a duplex, meaning that Ms. Kent and the couple can operate the house like a condominium -- establishing their own utility bills and maintaining their own living spaces, but sharing "common elements" like structural maintenance or use of the yard.

Ms. Kent says she and her housemates haven't yet discussed rules about pets or what would happen should Ms. Kent marry or invite a romantic partner to move in. However, they have agreed to hang on to the property for at least five years, subletting before selling, and have discussed dividing repair and capital-improvement costs.

If you're considering this purchase option, the following steps may help you avoid some common traps.

Real-estate agents and lawyers stress that buyers first need to establish their separate and combined borrowing power before they can undertake a purchase. Fortunately, mortgage lenders in many markets are becoming more flexible about working with unmarried joint buyers.

"It's mostly a credit issue," says Matthew Royse, spokesman for the Mortgage Bankers Association of America. As with any other loan, lenders look at the combined credit and income of the buyers, rather than their relationship status or lack thereof.

Andrew Wayne, a buyer's agent in the Dallas-Fort Worth area, advises unmarried couples to consult a mortgage broker first because the mortgage pre-approval will give buyers a sense of their options for purchasing and, from there, how they can secure a title. "The title company takes its instructions from the mortgage company," he says.

While ownership likely would be inherited if a married partner dies, unmarried buyers have to take extra steps to work out details. Here are just a few questions to consider:

• Whose name goes on the ownership title?
• What if one party is the sole borrower, but others share mortgage payments? Who gets the equity as a survivor?
• What if the titleholder decides to sell or alter the property?

Often such questions are answered legally by the buyers' choice of how to assume their home title (joint tenancy or tenancy in common). However, in some states, family lawyers (who help develop prenuptial agreements and set up shared-living arrangements for divorced families) often end up advising such buyers on how to anticipate the future and develop what are in essence exit strategies from both property ownership and relationship status.

Because laws vary by state, lawyers such as Maria Gonzalez, an attorney in Miami who frequently handles real-estate issues for unmarried and divorced buyers, recommends that joint buyers first meet with a lawyer to get a clear sense of their state's title and co-habitation statutes. Some states spell out owners' equity in a property at the title level, while others allow buyers to create "co-habitation agreements" that add details and qualifications (exit strategies, financial arrangements if a resident pulls out, upkeep covenants) in addition to the title. Co-habitation agreements, however, hold less weight in disputes and court hearings.

In Florida, she says, the title ultimately determines one's rights and equity in a property. Texas, on the other hand, has "common law" rules, which mean that residents who pay into a home's mortgage still have rights even if they're not listed on the home's title. Thus, unmarried buyers in that state might list one name on the title yet be considered by the law as co-owners.

"If you've lived together six or more months and co-mingled funds," Mr. Wayne says, "the law [in Texas] states that you have rights along with the person who owns the home."

A joint-tenancy title, popular with couples, generally means that the entire space is equally shared and the owners have rights of survivorship. But friends and partners in a property may declare a "tenancy in common," so one housemate could sell his or her interest to someone else.

Ms. Kent and her buying partners structured their title in California as a "tenancy in common," which means the home is divided in two parts, with Ms. Kent and the couple each half owner. They've made a verbal agreement to try to keep the property for at least five years to build equity.

Circumstances change and may require changes in the owners identified on the title. But borrowers who anticipate adding or altering the title need to see if the lender has rules controlling such changes, Ms. Gonzalez notes. The lender technically has the right to deny an additional name on the title, to require a full mortgage application from the potential titleholder, or at least review the title applicant's financial situation.

Unlike single buyers (or married buyers acting together) who can sell or sublet without affecting others, unmarried buyers need to set the terms of their financial relationship to one another. What if someone relocates or decides to sell? Can they sublet? Do they have to find a replacement buyer or renter, or pay a fee?

Gayle Dawson, a real-estate agent for Zip Realty in North Andover, Mass., recently helped a couple and their single friend purchase a $173,000 townhouse in Tyngsboro, Mass., a community along the New Hampshire border. The buyers, who range in age from 24 to 31, decided to share the purchase, in part for investment reasons, knowing that they won't live together forever.

"If the married couple has a baby, there's no way they could all stay," Ms. Dawson says.

Ms. Guerin, the San Diego real-estate agent, recently sold a three-bedroom condo to two 20-something men who work for the military and who arranged a tenancy in common, allowing them to split profits evenly when they sell. For capital-gains-tax purposes, they intend to live there at least two years.

Some buyers create a formal co-habitation agreement. Ms. Gonzalez describes one unmarried couple who share a home; the man holds the title, and she is the homemaker. If he sells the property, she gets $200,000, representing her contribution to the partnership. While a co-habitation agreement holds less weight than a title in a dispute, its existence still has some influence in showing a court or jury the terms under which buyers intended to live, she says.

Ms. Kent likens her purchase arrangement to a condominium association, where "we're on our own with our units. Think of a brownstone building with two apartments. We'll have to get together and talk if the boiler blows up."

She also says she'd advise prospective joint buyers, if they're not familiar with one another as a couple, to find buying partners whom they trust financially -- because as much as they're housemates, they're also going to become investment partners.

"You want people you like," Ms. Kent says. "Don't do this with your sibling or best friend, though."

-- Ms. Doherty is a free-lance writer in Seattle.

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