Speaker 1: With real estate prices becoming more outta reach for many friends are teaming up to buy homes together. Intrigued before you make a joint move, I've got five important questions worth answering. First
Speaker 1: Record, low housing inventory is driving sale prices through the roof. Zillow recently revised its 2022 housing forecast to say that home value growth will escalate through the spring and peak at around 22% [00:00:30] in may. This spells competition for buyers and to increase their chances of winning a bid. Get this some are collaborating and purchasing homes together. A recent survey by realtor.com says more than half would consider co buying a home with a loved one, a friend or a family member. So what are the risks? Well, unlike buying a home with a spouse, someone you're married to, there are no state laws to ensure that a home's equity will be divided equally between [00:01:00] you and a friend. If you're considering co buying a home, here are some key questions to review ahead of time. Question number one, do you know each other's credit scores or salaries or any financial information?
Speaker 1: I mean you and your friend may have no issues with the social aspect of living together, but have you ever spent some time opening up about money while it may feel uncomfortable to talk about your finances with a friend or relative? It is essential when co buying a home before [00:01:30] pre-qualifying for a mortgage and starting the bidding process, be sure to lay out your finances and be transparent. You don't wanna find out late in the process that one of you has a very low credit score or surprise a lot of debt. Next question, who will own the home. You can both own the property, of course, but being a co buyer does not automatically make you a co-owner. In other words, it should not be assumed by anyone that just because you are both on the mortgage, that you will also [00:02:00] both be on the deed.
Speaker 1: That's the legal document that passes the ownership of the house from one owner to the next. This is a step that usually gets cleared and finalized by the closing. So just be sure to stay on top of all the paperwork, rather than letting one friend take the wheel and manage all of the documents, accidents can happen. And if you're not on the deed, well, then you have no ownership rights. If the house gets sold, you risk not getting proceeds from the future sale. Third question, how are you gonna share [00:02:30] the expenses? Big, big financial consideration. Now whether you plan to split the mortgage and related housing costs right down the middle, or work out a different plan, a legally binding agreement will be essential to the success of your partnership. And for this, I would recommend working with an experienced real estate attorney. Here's where you're gonna wanna draft out.
Speaker 1: You'll want to define what each person contributes to. As far as the down payment, what each of you will pay toward the mortgage, the taxes, the utilities, [00:03:00] the maintenance, and most importantly, make sure that the agreement covers what happens. If you break up, you can update the agreement as needed, and you can also download contract templates on sites like rocket, lawyer, and legal zoom. Fourth question. How will you account for the tax breaks? Since only married couples can file taxes jointly and apply for home ownership related tax breaks on a shared return. You're gonna wanna discuss with your friend or loved one, how you're going to account for things like [00:03:30] mortgage interest and property tax deductions. While only one of the owners can include the deductions on their tax return together, you may decide to split the savings after the tax filing season is over and you've computed your return or after the first year, you can take turns every year, claiming the benefits again, here, working with an expert, a tax expert who can break down the figures may be helpful to ensure that you are sharing the tax incentives equally.
Speaker 1: Finally, what if one of you [00:04:00] wants to move out? Anything can happen, right? What if a relationship ends? What if one of you can no longer afford the mortgage? What if one of you wants to relocate for a job working out these what ifs these hypothetical scenarios ahead of time and having your co-ownership agreement written with the help of a real estate attorney is wise and will ensure that when life happens, you are prepared and you don't need to scramble. Think of it like a prenup, but for your home instead of a marriage in summary, partnering with a friend or [00:04:30] a relative to buy a home may make the purchase more feasible, but be sure to go in with eyes wide open and be sure if you like our videos, that you are hitting that subscribe button, what are some of the real estate questions you're having right now? It's a tough season if you're buying and if you're selling, what do you wanna know? Leave us your comments and questions below. And thanks for watching.