Pitching In: How to Buy With Others
Make sure all parties are on the same page before co-owning a property
By John Morell, FrontDoor.com |
Published: 8/06/2008
Step 3: Prepare to ExitIt may seem counterintuitive to be figuring out a way to get out of a joint home ownership before you even get into one, but this may be the most critical step. "You can't foresee divorces, deaths or changes in finances," says Radakovich. "So you've got to plan for how you'll handle one partner's desire to get out of the arrangement."
Here are some issues to consider:
- Right of First Refusal -- When one partner needs to get out of the ownership agreement, the others involved are usually given the right to buy them out based on a fair market appraisal. If one party feels the appraisal is off, they can do another one and negotiate between the two.
- Marriage -- When an unmarried couple enters a legal agreement, no matter how committed they may be, there can be problems down the road for a joint ownership agreement if the relationship crumbles. "When there's a divorce between a married couple, there's a clear remedy for the court to decide on property obligations," says Radakovich. "But when it's a domestic partnership, it can get messy and expensive."
- Life Insurance -- Once you've purchased property with another party, it's wise to re-examine your life insurance to see if it can comfortably cover your share of the mortgage, taxes and upkeep.
- Open Warfare -- In a worst possible scenario, the partners sue each other for breach of contract, damages, etc. Consider adding a clause to your ownership agreement in which everyone would seek out a mediator to handle an unresolved dispute.
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