Written by Denise Lewis, REALTOR®, Broker, ABR, SRS
As home prices in many areas have skyrocketed over the past few years, those looking to buy a home have increasingly turned to unconventional options to help finance their purchase.
For some, this may mean seeking friends or family members to serve as investment partners. While pooling resources in an expense market may sound like a no-brainer, these purchases can lead to hurt feelings and financial disputes if not done properly.
If you are considering this option, here are three important tips to keep in mind:
Stick to the agreed-upon budget.
Before you even begin your home search, set a budget that everyone who will be contributing money can agree to. Be sure to account for not only the purchase price, but also expenses such as closing costs, property taxes, utility fees, repairs and maintenance, HOA fees, and potential unexpected costs.
Then, consider how these costs will be divided among the parties and put your agreement in writing. Regardless of the cost breakdown you have agreed to, choosing a property that is comfortably within your budget can help avoid stress and future conflicts.
Determine how the property will be titled.
In addition to determining how much money each party will contribute to the purchase, it’s important to consider how ownership will be divided. For instance, if three friends are buying a home together, they may agree that one person will own 50% of the property and the other two will own 25% each. Or maybe they all own equal shares. Typically, these percentages will reflect each party’s initial financial investment in the property.
Consult an attorney.
While your REALTOR® will be able to offer plenty of guidance on your home search, it may be best to consult an attorney if you will be buying a property with friends or family members. A lawyer can explain the potential legal implications and help you structure an agreement that will reduce the risk of future conflicts.
Buying a home with a relative can be an attractive way to enter the real estate market. By following the above steps, you can protect everyone’s financial interests in the property and your personal relationships as well. Happy shopping!
