I am teaching a class tomorrow (Wednesday, Jan 7 ... noon) at the Keller Williams Lake Travis market center on working with non-married clients. It is a panel discussion that includes a lender and an attorney. We teach this class on an ongoing basis to non-married buyers. Here are some things we think you and your clients should know:
Gay or straight, doesn't matter. Two "non-married" persons purchasing a property together in Texas need to know a few things about owning that love shack (or investment shack). Primarily, co-ownership does not necessarily convey the same rights as with a married couple. Many of these rights should be specifically created at the time of purchase of the home or shortly thereafter with appropriate legal documents such as a will.
This article is not intended to scare but it is scary how many non-married couples own property together without the appropriate legal documents in place to protect themselves in the case of death, disability or separation. Lovely topic, we know.
Did you know that if you own property with your friend, steady, lover, partner, college roommate, whatever non-married person you like and he or she dies without the appropriate and challenge-proof legal documents in place, that you now, more or less, own half of that property with their heirs? Oh joy. You may love the family to pieces but do you want to be in a business relationship with them?
What are your intentions if one person wants out? One person needs to move out of state for a new job? You break up? Or there is a death or disability. In the case of partners, is it the intention for the surviving person to keep the house, take over the full responsibility of the loan or does the deceased's heirs now own half the house?
You could end up putting yourself in a position where you may have to refinance to buy out the other person's family at today's market value and mortgage conditions or be forced to sell the home if you do not qualify for the new loan?
If you assume ownership of the property upon the death of the other co-owner, you may potentially have to address probate, inheritance challenges, inheritance taxes or risk the mortgage being called due. We recommend legal counsel at the time of purchase or shortly thereafter to help you avoid these possibilities.
So a little advice when purchasing property:
• Talk. Talk about wills and estates and what-ifs. Call it a pre-nup if you wish, but have an understanding and, best, an actual agreement in writing.
• Ask your agent to put you both on the contract even if just one of you is on the note. It will help get the ball rolling in the right direction. Some lenders will allow this, some will not. Consult with your lender and Realtor to assess your best approach.
• Ask your lender and title company about Joint Tenancy With Rights of Survivorship (JTWROS). Many lenders will not permit them, especially if just one of the partners is on the Note. Sometimes you'll have a choice, sometimes not but you should ask.
• On tax benefits and who takes what, part or whole, talk to a good CPA for guidance.
We recommend working with Realtors, lenders, attorneys, tax advisors and title companies who are well-versed on working with non-traditional couples, non-married persons as this information is commonplace for them. A professional who is not may not understand these nuances and may waive them off as not important.
Let's take care of ourselves and our relationships. Legally sound home ownership is sound business.
Disclaimer: As licensed Realtors, financial advisors, mortgage brokers, we cannot give legal advice. We encourage you to discuss the details of your situation with appropriately licensed attorneys, financial and tax advisors.