Page 35 - Flathead Beacon // 11.5.14

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REAL ESTATE
MONTANA LIFESTYLES
Buying A Home With Others
NOVEMBER 5, 2014 | 35
By TASHA SCHROEDER
Buying a home is more affordable when you share the costs with friends and family. Pooling resources with a friend or family member can enable buyers to purchase a house they otherwise wouldn’t be able to afford. For young adults who can’t pay for a home on their own — or for family members who want to take advantage of the tax benefits associated with home ownership – co-buying is the best bet. As with any fi- nancial arrangement involving close friends or family, planning and careful consideration are needed to pre- vent future friction. And as with any legal contract, you should consult a lawyer to set the terms, but the follow- ing tips will point you in the right direction.
HOW DO YOU HOLD THE TITLE?
The type of title determines who can sign docu- ments and how the property is transferred in case of an owner’s death. Co-buyers who aren’t married to each other may share a title as tenants in common (TIC) or as joint tenants with right of survivorship (JTWROS). Married co-owners may also take title via community property or tenancy by the entirety.
HOW TICS AND JOINT TENANCIES DIFFER
When each co-owner has an equal interest (or share) in a home, a JTWROS applies, with one title held between all co-owners. When a co-owner dies, their share goes to the other owners. Ultimately, the last sur- viving owner will own all shares in the property.
The shares of tenants in common may be equal or unequal, and each co-owner has a separate legal title. In a TIC, there is no right of survivorship, so the home doesn’t go to the last surviving owner. Each co-owner can pass along their ownership through a will, mean- ing that the remaining tenants in common may find themselves sharing ownership of a home with some- one they never intended to. Tenancy in common can be dissolved when one owner buys out another, when the property is sold or when one owner files a partition ac- tion to sell the home.
HOW TICS AND JOINT TENANCIES ARE SIMILAR
In both tenancy-in-common and joint-ownership contracts, co-owners have equal rights of possession,
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meaning that each may occupy and use the property. If the home is rented, each co-owner is entitled to rental income from the entire property in proportion to the ownership share.
WRITE A CO-OWNERSHIP AGREEMENT BE- FORE YOU BUY
Sharing the cost of buying a home can benefit ev- eryone involved, but it’s essential to determine ground rules before any money changes hands. Co-ownership agreements are basically the prenuptial agreements of home ownership: They lay out the relevant rights and responsibilities of each party.
While it might be difficult to imagine problems at the outset, when you’re excited to buy a home with fam- ily or friends, these documents are important because they are the only way to resolve ownership issues aside from court proceedings. And when thousands of dol- lars are stake, it’s important to address at least these three concerns:
• What are the ownership percentages? For joint tenants, this is easy: Each co-owner has an equal share. Tenants in common may choose to divide the shares, perhaps based on the amounts contributed for the down payment.
• How are ongoing expenses divided? The division of recurring expenses such as mortgage payments, property taxes, insurance, utilities and maintenance costs should be spelled out in your co-ownership agreement. They may be divided according to own- ership percentages or the amount of time each co- owner will invest in improving or providing upkeep for the property. Consider setting up a joint checking account so that any co-buyer may draw from it to pay shared bills and expenses.
• What happens when one co-owner wants to sell?
When co-owners want to sell their interest in the house, they are not required to sell to someone ap- proved by the remaining co-owners. However, a co- ownership agreement can grant the remaining co- owner the right of first refusal.
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