Real estate agent discusses shared home ownership with couple

Home Co-Ownership: Tips for Buying a Home with a Partner

According to a National Association of REALTOR’s report, 9% of homebuyers in 2023 were unmarried couples, while 59% were married. This is the lowest share of married couples since 2010.

As a real estate agent, you may be tasked with helping partners find a home to buy. There are legal ramifications with this type of transaction. Feel free to share this blog with your clients, as we will cover topics like “How does co-ownership work?” and “What are the different types of shared ownership?”

What is Home Co-Ownership?

Co-ownership in real estate between unmarried partners refers to a situation where two or more individuals who are not legally married jointly own a property.

How Does Co-Ownership of a House Work?

Co-ownership, also known as fractional ownership or shared ownership, in a house typically involves multiple individuals or entities owning a portion of the property together. This arrangement allows individuals to own a percentage of the property while sharing the costs and responsibilities associated with homeownership.

There are different types of shared ownership, but first, let’s consider the pros and cons of this arrangement.

Pros and Cons of Home Co-Ownership

Buying a home is a significant financial decision. It’s important to carefully consider the pros and cons of purchasing a home with an unmarried partner.

Pros of Home Co-Ownership

Buying a home with a partner can offer several advantages:

  • Shared financial responsibility: Purchasing a home with a partner allows you to share the financial burden of homeownership, including mortgage payments, property taxes, insurance, and maintenance costs.
  • Increased buying power: Pooling your resources with a partner can increase your purchasing power, allowing you to afford a larger or more desirable property than you could do on your own.
  • Building equity: Owning a home with a partner allows both of you to build equity in the property over time, which can be beneficial for long-term financial stability.
  • Shared living expenses: Sharing a home with a partner can also lead to reduced living expenses, such as utilities and household bills, compared to living separately. However, these benefits can be realized without buying a home.

Cons of Home Co-Ownership

Even though it may seem that there are many financial benefits to buying a home with a partner, there are drawbacks as well.

  • Legal and financial risks: Buying a home with a partner can be legally and financially complex. Without clear documentation, disputes over ownership and financial contributions can arise.
  • Relationship uncertainty: Disputes over the property can arise in the event of a breakup. These disputes can be compounded if both partners don’t contribute equally to the purchase or maintenance of the home.
  • Limited legal protections: Unmarried partners do not have the same legal protections as married couples regarding property ownership. It may be essential to create legal agreements to protect both partners’ interests.
  • Financial dependence: Sharing financial responsibilities with a partner can lead to dependency, especially if one partner contributes more to the purchase and maintenance of the home.
  • Difficulty selling or transferring ownership: Selling or transferring ownership of a property when unmarried partners co-own it can be complicated, especially if both partners do not agree on the terms or if one partner wants to buy out the other’s share.

What are the Different Types of Co-Ownership?

Partners considering sharing ownership of a house should first discuss the plan with an attorney. State-specific laws differ on shared ownership, and all contingencies must be considered, including what happens if one of the partners dies.

Here are three different types of shared ownership to discuss with an attorney.

1. Joint tenancy with right of survivorship

Each partner has an equal ownership interest in the property in this arrangement. If one partner dies, their share automatically passes to the surviving partner rather than their heirs.

2. Limited liability corporation (LLC) or partnership agreement

Partners may choose to establish a partnership agreement that outlines the rights and responsibilities of each partner regarding the property. This agreement can cover ownership percentages, financial contributions, maintenance responsibilities, and procedures for selling or transferring the property. Some partnership agreements also include dispute-resolution mechanisms.

3. Tenancy in common

Each partner owns a specific share or interest in the property with this type of arrangement. These shares do not have to be equal, and they can be freely transferable or inheritable. If one partner dies, their share of the property passes to their heirs or as outlined in their will.

Tips for Buying a Home, Together

Here are some tips to share with your unmarried clients who are considering buying a home together. Of course, many of these tips could also be helpful for your single or married clients.

1. Set a budget

Every decision-maker must be on the same page regarding the budget range for the home. Remind your clients that it’s helpful for all parties to work out disagreements in advance. The more cohesive the joint vision of the house, the smoother the search.

2. Research financing options

When unmarried partners decide to buy a home together, researching financial options is crucial for a smooth process. They should explore mortgage options tailored for co-buyers, considering factors like credit scores, income stability, and debt-to-income ratios. Talk with multiple lenders and compare rates and terms.

3. Think about the property location

Once the partners have their budget and financing hammered out, each partner must agree on the property’s location. Before a buyer even talks to an agent, they should talk to each other. It’s also helpful to decide on the house requirements – and features that are wanted but not needed.

4. Hire a real estate agent and search for a home

Working with a real estate agent when searching for a home is beneficial. Real estate agents have full access to the MLS, which means they know about listings that are not publicly advertised. In addition, they have in-depth knowledge of the local housing market, including current inventory, pricing trends, and neighborhood dynamics. Additionally, an experienced agent will negotiate on behalf of their clients to secure the best possible price and terms.

5. Rate the options

After viewings, both parties should discuss the options, share their notes, and combine them to give a complete impression of how each home option suits the joint vision.

6. Get advice from other shared owners

Buyers may find it helpful to get advice from other partners who have shared ownership of a property, as a large purchase has emotional, legal, and financial ramifications.

As a real estate agent, are you equipped to serve all types of buyers and sellers? Increase your knowledge and stay current on ownership laws in your state so you can serve single and married clients better. Colibri Real Estate School can help. We offer state-specific real estate continuing education courses on various topics to help you stay on top of current industry trends while you renew your license. Learn more by selecting your state on Colibri’s real estate license renewal page.

“Highlights from the Profile of Home Buyers and Sellers.”