Thanks to rising home prices, many potential buyers are exploring alternative ways to make their dreams of owning a home a reality. And for some, that means pooling their resources and buying a home with friends or family members.
And while this can be a great way to purchase a home in a challenging market, there are things you’ll want to keep in mind in order to ensure the process is a smooth one.
So what, exactly, are those things to keep in mind?
A recent article from REALTOR® Magazine outlined the tips people need to know when buying a home with friends or family members, including:
- Set a budget before you start your home search… When you’re buying a home with other people, it’s important to get clarity around budget and finances—and you’ll want to get that clarity before you start your home search. Sit down with your co-purchases to review finances and finalize the budget—which should not only include how much house each party can afford, but how much they’ll need to budget for additional expenses, like closing costs, legal fees, and home maintenance.
- …and put that budget in writing. Once you’ve finalized your budget, you’ll want to put it in writing and have each purchasing party sign it. That way, you can avoid any future conflict over expenses and how much each person is expected to contribute.
- Determine how the property will be titled. When you buy a home with other people, how the property is titled can be complicated. Consult a real estate attorney; they can help you determine the best way to title the property based on the purchasing parameters. (For example, if you’re purchasing a home with two friends—but you’re fronting most of the down payment—you may want to draft an agreement that states that you own a higher percentage of the home.)