How to make homebuying smoother for untraditional clients

This article was last updated Aug. 12, 2023.

Let me tell you a success story.

Imagine a couple who have been dating for quite some time and are now ready to move in together. Because they live in an urban area with great home value appreciation and are friends with a local Realtor, they decide to buy instead of rent.

As they gather and share their financial information and begin having serious, and sometimes difficult, conversations about their future, their goals and their values, they realize that they are not on the same page in a number of areas. The process brings up hidden conflicts and pushes their buttons.

Instead of buying a home together, they break up.

That might not sound like a success story, but it is. This couple, facilitated by a smart and caring agent, asked the right questions, had the right discussions and came to a more thorough understanding of what they wanted — and what they didn’t want.

It’s been a few years and they both are living their best lives with new partners. According to their Realtor (who wished to remain anonymous to preserve their privacy), “They both ended up exactly where they should be.”

Ownership issues for non-spouses

According to National Association of Realtors’ 2018 Profile of Buyers and Sellers, 8 percent of recent homebuyers were unmarried couples. In addition, another 27 percent of buyers were single women (18 percent) and men (9 percent).

Preparation materials for the real estate license exam are generally written with the assumption that homeowners will be married couples. In part, this is because laws on the books regarding ownership are primarily geared toward married couples or single adults, with little acknowledgement of other types of ownership scenarios.

With the increasing prevalence of unmarried couples buying homes — as well as single adults buying homes along with non-romantic partners like roommates, siblings and other friends or family members — it’s more important than ever for real estate agents and brokers to provide guidance to protect their clients and ensure that they are asking all of the right questions.

According to broker June Gottlieb of Warburg Realty, buying a home with someone other than a spouse requires figuring out as many “what ifs” as possible. For example, if a couple breaks up they can either:

• Allow one person to buy out the other
• Require that the asset be sold based on appraised value

If one person in the couple dies, does the other person:

• Have to own jointly with the heirs whom they might not know?
• Inherit the property outright?

In addition, “If one party wants to sell and the other does not, an exit strategy should have been determined upfront and noted in a separate legal document,” Gottlieb said. “Co-purchasing is a business transaction. As such, a separate partnership agreement should be generated and signed by both parties.”

Boca Raton attorney Eric Klein of Klein Law Group, Pennsylvania, agrees. He compared this type of document to a “pre-nuptial agreement relating to the house only.”

“We have handled many partition actions where the couple breaks up and one party wants to sell the house and the other party refuses,” Klein said. “In this case, we have to file a lawsuit to force the sale of the property. It could be very expensive and emotionally draining. The agreement does not necessarily mean that the couple will avoid litigation, but a written agreement will be enforceable in court and make it less costly.”

Another consideration is the balance of financial obligation between non-married partners. Unlike a home purchased by spouses, who generally see the money involved as “theirs” and assume a 50/50 ownership scenario, unmarried co-owners will want to spell out the percentage of ownership.

“Depending on how the couple wants to proceed, my advice would be that ownership interest in the property be reflected on the deed itself,” Klein said.

“For example, perhaps one party will own 75 percent and the other party will own 25 percent. That could be reflected right on the deed and the property could be held as tenants in common where if one party dies, that party’s share of the property goes to that party’s estate instead of going to the other owner.”

Alternatively, according to Klein, the owners might choose to have the property go to the surviving owner, holding the property as tenants by the entireties with rights of survivorship.

Financial issues can also arise when one owner has significantly more money or better credit than the other.

According to NYC broker Michael J. Franco of Compass, many co-ops choose to look at the financial disclosure and background information for each buyer, just as they would with a married couple. This can create barriers to joint ownership when one partner has a problematic financial history.

“While these arrangements are now more common — especially in New York where most of the properties are co-ops — often times, a purchaser who intends to live in the co-op with the non-spouse partner will only include themselves on the contract to avoid the necessity of a non-purchasing partner (or a partner with less than stellar financials) being required to submit an entire application,” Franco said.

Livability issues for co-owners

Aside from financial issues, the things that can cause tension in a co-ownership relationship are the same things that can cause problems in any roommate situation.

According to Diana Fitts, occupational therapist with The Sensory Toolbox, “From a relationship perspective, it’s crucial that you lay out all of the logistics in extreme detail in writing. Even if it feels overblown and unnecessary, you will be grateful to have a record of your agreement should a problem arise.”

According to Fitts, these types of issues can include:

• Bill payments
• Storage space
• Morning schedules

In addition, consider

• Overnight guests
• Social events/parties
• Noise levels
• Common areas
• Chores
• Pets

Any or all of these daily factors can become irritants, especially if the co-owners do a poor job of keeping communication flowing. The more communication there is upfront, the less there is to work out day-to-day.

SparkRental co-founder Denise Supplee, a licensed Realtor, property manager and investor, recently purchased a mixed use investment property with her husband and their daughter.

She suggests using a shared spreadsheet or roommate agreement. “It spells out just about every scenario,” Supplee said. “That becomes an accountability agreement which creates boundaries and leaves less room for arguments.”

Buying with a friend can work

According to Ramya Menon, Creative Marketing and Communications Director for UAE real estate portal Bayut, buying with a friend or family member can, in fact, be an even better option than buying with a romantic partner.

“Contrary to what people may think, buying a house with a friend is a lot more productive and, more importantly, stable. Couple and marriage breakups are a lot more common than friendships discontinuing.”

Encouraging and facilitating communication and offering appropriate advice upfront can help keep your non-spouse homebuyers happier and more satisfied after the sale. And, if all of those questions and logistics cause them to give up on the idea of homebuying, you’ll do them the kindness of helping them realize that sooner rather than later.