Purchasing real estate with another person is likely one of the largest investments two people will make.
Done correctly it can share expenses, allow equity to grow quicker, and put more people into real estate sooner. Done incorrectly it can ruin friendships, drain savings accounts, and cause legal problems for years to come.
Here’s the thing…
Most people bypass the planning stage completely. They fall in love with the property, rush the paperwork and work out the details later. Huge mistake.
This pre-offer home buying checklist includes everything needed to know about buying a house together properly… well ahead of time.
What’s covered:
- Why Shared Ownership Is On The Rise
- Choosing the Right Ownership Structure
- Getting the Finances Sorted
- Legal Agreements That Protect Everyone
- Title Insurance for Co-Owners
- Building a Solid Exit Strategy
Why More People Are Buying a Home Together
Statistics prove it. Co-buyers now account for 26.7% of all home purchases and the trend is accelerating.
Home prices are up. Interest rates remain stubbornly high. Saving for a down payment on one income has never been more difficult. Buying a home with a partner makes financial sense.
The market has changed the rules of homeownership.
Nearly 15% of Americans have already co-purchased a home with someone other than a romantic partner — and half of other Americans would do it, too. THAT’S NOT A NEW TREND. THAT’S A REVOLUTION.
Joint ownership, however, comes with its own unique set of problems that traditional buyers will never have to worry about. For this reason, organization is even more important when involved in shared ownership than it is at any other stage of the home buying process. Knowing exactly what to expect financially, including understanding both mortgage splits and closing costs such as how much does title insurance cost in PA, is one thing that should never be overlooked when purchasing property with someone else.
Step 1: Choose the Right Ownership Structure
This is perhaps the first — and most crucial — decision when purchasing property together.
There are two main options:
- Joint Tenancy: Each individual owns 100%. When one dies, the other automatically owns the entire property. Easy-peasy!
- Tenancy in Common (TIC): Each individual owns a designated percentage. Percentages may be sold or transferred separately from the others. Good for multiple buyers who have contributed different amounts toward the purchase price.
Which one is right? It depends entirely on the relationship and the financial arrangement.
Friends putting down unequal contributions toward the down payment? Likely Tenancy in Common is a better option. A married couple splitting expenses 50/50 that plan on living there long-term? Joint Tenancy could be a better choice.
Don’t choose based on what sounds simplest. Choose based on the actual situation.
Consult with a real estate attorney before making this call. Setting up the wrong ownership structure on day one leads to monumental issues later — issues that are costly to remedy.
What About Unmarried Couples?
Another point where unmarried couples who purchase property together should take extra caution. Without the default protections afforded by marriage law, the way the property is owned and the documentation between parties are their only recourse. Do not skimp on legal advice in this area.
Step 2: Get the Finances Sorted First
Money is where most shared ownership arrangements fall apart.
Prior to submitting an offer on a property, all co-buyers must be fully agreed on:
- How much each person is contributing to the down payment
- How monthly mortgage payments will be divided
- Who covers ongoing costs like property taxes, maintenance, and insurance
- What happens if one person cannot meet their payment obligations
Obtain approval jointly. All credit scores and incomes are taken into consideration by lenders at the time of application. One poor score can affect the mortgage for everyone. If there is a huge difference in scores between applicants it may be better to wait and build up credit first — even if that means waiting several months before applying.
Come to an agreement on a joint budget for closing costs in advance. They add up quickly and are often a surprise to co-buyers at settlement.
Step 3: Put Every Agreement in Writing
A handshake agreement is not a legal document. Full stop.
When purchasing property with someone else, it is critical to have a co-ownership agreement. This agreement covers every aspect of the relationship with a property co-owner — and should be prepared by an experienced real estate attorney.
A solid co-ownership agreement should cover:
- Each party’s ownership percentage
- Financial responsibilities for the mortgage, taxes, and upkeep
- Decision-making rules for renovations and major expenses
- What happens if one owner wants to sell their share
- How disputes get resolved if co-owners disagree
It can seem unromantic, particularly when entering into co-ownership with a best friend or sibling. However, this paperwork ensures that everyone is protected if the relationship sours — and between years of co-owning something, things are bound to change.
Step 4: Don’t Skip Title Insurance
Here’s something many co-buyers overlook until it’s too late…
Title insurance isn’t only for the closing day rush. Each time a home is purchased with someone else, every party has a financial interest in ensuring the title is pristine.
Two types worth knowing. Lender’s title insurance covers the mortgage company. Owner’s title insurance covers the buyers — all of them. Without owner’s title insurance, co-owners can unknowingly purchase a property with an unpaid lien on it, a boundary dispute, or even a previous claim of ownership that resurfaces years after closing.
Owner’s title insurance is the one co-buyers should never skip.
The premium is paid once at settlement. Because it changes depending on the state and how much the house is worth, including this cost in the shared budget from the beginning is essential. No surprises at the closing table! This is especially true for Pennsylvania co-buyers.
Step 5: Build a Clear Exit Strategy From Day One
No one enjoys talking about this topic. However, it could be the single most crucial thing on the checklist.
What happens when one co-owner wants out?
Jobs change. Finances change. Relationships change. And inevitably someone will want or need to sell their portion. Without planning ahead, it can get messy quickly.
The co-ownership agreement from Step 3 should spell out:
- Right of first refusal — does the non-exiting co-owner have the first option to purchase the exiting party’s interest?
- How the property will be valued when someone wants to exit
- What happens if co-owners can’t agree on a sale price
- Required notice periods and timelines for any exit
Negotiating this upfront safeguards all parties. It’s not an admission that the joint venture is going to fall apart — it’s an acknowledgment that there is a plan should the worst happen.
The Takeaway
Investment property purchased together is one of the wisest investments into the property market these days.
However, it only works with the proper foundation set up first. The ownership structure, finances, legal docs, title protection, and exit strategy should all be taken care of before closing day.
To quickly recap the checklist:
- Choose the right ownership structure for the specific situation
- Align every co-buyer on financial contributions and ongoing shared costs
- Get a detailed co-ownership agreement drafted by a real estate attorney
- Factor in owner’s title insurance for every party on the deed
- Build a clear, agreed-upon exit strategy from day one
Do the planning work ahead of time and buying a home together can be a truly awesome financial decision. Skip it — and even the best home deal can become an expensive, relationship-wrecking battle.