Agreeing on Details Before – Avoids Fractures Later
With our resilient housing markets, some people looking for creative ways to get into home ownership may be exploring the option of co-ownership.
Before the home search, prepare a written agreement which outlines the details and expectations of co-ownership:
• The ownership percentages.
• How the down payment and mortgage payments are divided.
• What happens if one party wants to sell and the other doesn’t.
• What happens if one owner wants to refinance or borrow against equity.
• How maintenance and renovation expenses will be divided.
• Areas of the property that will be common use and which may be exclusive use.
• Subletting and guests.
• How costs and profits will be divided when the house is sold.
• How co-owners will resolve disputes.
• If there are any activities that could trigger a “time to sell”.
Things go smoother when expectations are agreed to ahead of time and put in writing. Also, be clear on the tax implications. A sale may trigger capital gains taxes, so it’s a good idea to bring a tax professional in on your plans, too.