How to buy a home with your boyfriend or girlfriend: Part 2 (The Game Plan)
In this series, we explore buying a home with your partner (outside of marriage). Buying the home is only half the battle. It’s important to do your homework and take steps to protect yourself and your investment. Having a plan for your purchase will save you time and money. Establishing a framework for co-ownership will provide you peace of mind and limit risks. Check out Part 1 of this series here.Buying a home is an important decision. Homeownership is highly-correlated to wealth creation. It enables you to build equity in an asset you own, provides a natural inflation hedge, helps you avoid rent increases, and confers tax benefits. For many, buying a home represents the single largest financial transaction of their lifetime. But really, it’s more than that. If home is where the heart is, then buying a home is a highly personal affair. You’ll live, sleep, eat, laugh and cry within the walls of your home.
If you’re thinking about buying a home with your boyfriend or girlfriend, where should you start?
Plan & build consensus
The first step is to get a game plan together. Think about hosting a dinner party, and what goes into the preparation:
Choosing a date, time and location
Determining headcount (and who’s invited)
Deciding what’s for dinner
Inviting your guests
Procuring ingredients, drinks, and supplies
Depending on the relative weighting of “party” in “dinner party”, you may well decide to pick up a few cleaning supplies. Even a Super Bowl party requires basic planning. Pizza and beer cost money and tend not to appear out of thin air. If the party has two hosts, then there’s going to have to be some degree of consensus. And then, of course, there’s the bit where you actually host the party, cook dinner, and entertain your guests. Buying and owning a home together is slightly more involved.
Sound simple? Landing a 747 is simple for a career pilot with 15,000 flight hours. Learning Portuguese is simple for a polyglot fluent in Spanish, Italian, French, and Latin. Reaching consensus on a broad range of issues which affect the joint purchase and co-ownership of an expensive asset which doubles as your living space should not be taken for granted. Real estate attorney Erika Shinpaugh advises that couples should “plan and build as much consensus as possible before any purchase.” Having a solid plan of attack based on consensus will save time and money and ensure things go smoothly, both during the purchase and for the duration of co-ownership.
Factors to consider
Before embarking on the home search with your sweetheart, it’s important to agree upon key aspects of both the purchase and co-ownership:
Target Property: size, location, attributes, amenities, state of repair, price point, etc.
Individual contributions: down payment, credit scores, monthly financial contributions, funds for upgrades/repairs, and other non-financial contributions
Goals for the purchase and co-ownership: timeline for purchase, timeline for ownership prior to the next move, relative importance of the property as an investment versus as a living space, etc.
How each party responds to the above will have implications for whether or not a joint purchase makes sense. Respective financial contributions and individual preferences may also influence how you decide to split ownership interest in the property. And of course, you’ll want to address for the elephant in the room: the possibility of a breakup. “Even if discussing and answering certain types of consensus-building questions now might feel uncomfortable or awkward, it could relieve a lot of stress and encourage swift resolution down the road,” says Shinpaugh. The fact is that nearly half of American marriages end in divorce. Statistically, this has no bearing on the long-term probability of success of a single relationship, but it is a good reason to work out the details before you move forward.
Your time, money, and relationship are valuable
As any real estate agent or loan officer who has been in the business for awhile can attest to, here are some common mistakes to avoid:
Viewing (multiple) homes before you’re ready. Running around town to view properties before you have agreed on the above may be fun, but it’s unlikely to be fruitful. In hot real estate markets, desirable homes are not on the market for long. To optimize the time you spend house-hunting, it is a good idea to get on the same page about what you’re looking for in a home before viewings. Caveat: some folks like cruising homes.
Engaging a real estate agent too early. A top-notch real estate agent with local market knowledge, a proven track record, and a strong professional network values their time. Sure, many agents will take you to coffee and entertain conversation. But the best agents are highly sought after and generally choose to work with buyers who are prepared. In the negotiation and execution of your purchase, you’ll want the best of the best representing you. By being prepared, you become a more enticing prospect to top-notch real estate professionals.
Starting anywhere except at the beginning. The first step is (you guessed it): plan and build consensus around what you are jointly looking for in a property and key aspects pertaining to co-ownership. Buying a home together involves a lot of moving parts. Individual financial inputs and personal preferences of the co-buyers will affect eligibility and terms for financing and the home search. These inputs will have implications for co-ownership and the steps necessary to protect the co-buyers and their investment. A veteran loan officer recently joked, “many buyers give more consideration to features on a car than they do to those of a new home.”
The good news…
There are a lot of factors to consider when it comes to buying a home with your partner. At CoBuy, we’ve built a tool to make it easy to tackle the process of co-buying a home, from start to finish. CoBuy makes it easy to buy a home together, saves you time and money, and helps ensure you and your investment are protected. And best of all, there’s no cost to buyers. Here’s what Seattle-based couple Starla & Robert had to say about their experience using CoBuy to buy a home.
In the next post we’ll discuss joint-financing for unmarried couples looking to buy a home. If you have questions you’d like us to address, get in touch and we’ll be sure to cover them.
For more info, check out CoBuy or subscribe to our mailing list. Our online platform makes it easy to buy a home with friends, family, or a loved one. We guide you through the process from start to finish, assisting with planning, joint financing, and preparing a co-ownership agreement.