"In the last several months it seems that more and more when I'm representing a property, brokers will call and explain that they have two couples coming together," said Paul Zumoff, a broker for The Corcoran Group in New York City.
Zumoff is now representing two co-workers who have submitted a joint bid to buy a Brooklyn townhouse with plans to take one apartment each and rent out the third to offset the mortgage.
In San Francisco, college buddies David Van Horne and Sean Arnold are pleased with their solution to that city's soaring real-estate prices.
Van Horne and his fiancé pooled their money with Arnold and his wife to jointly buy a two-family house in a pricier part of town that neither couple could have afforded on their own.
Such a partnership invites the usual perils of doing business with friends or family. Notably, the discussions often go nowhere as prospective business partners begin to realize just how complex — and potentially ruinous to a relationship — such a venture can be.
"Buying together is a difficult thing," said Sophia Tzeng, who briefly pursued a partnership with a college friend, but is now bidding solo on a three-bedroom apartment for herself, her husband and their three children.
The two friends began looking for a building in Manhattan to renovate, hopeful that such a property would fit their price range. But they backed off when they realized how much work was involved.
"Saving the friendship was one of the reasons we decided not to do it," said Tzeng, a former lawyer who also needs more space for the ice-sculpture business she and her husband run out of their home.
Experts strongly recommend that prospective partners lay the ground work for their joint purchase with a legal contract. Seattle attorney Lisa Schuchman heartily seconds the idea.
"When people are making a business-type arrangement with family members or close friends, it's even more important to have a written agreement than it is with a business partner because you've got a lot more at risk if it goes wrong," Schuchman said. "You might feel comfortable about checking out a business partner, but not a friend."
That could cause problems if, for example, one buyer was a poor money manager who couldn't consistently carry his or her share of the financial load.
The legal agreement should spell out financial terms and basic understandings about upkeep — and answer the uncomfortable questions that arise if a relationship sours or one side encounters troubles such as unemployment, divorce or health problems.
Schuchman suggests such an agreement also spell out how disagreements will be resolved if the owners can't do so themselves.
"People can have really different ways of living in a home or attitudes about money or repairs or pets," Schuchman said, which is why she suggests that they agree in writing to use mediation or binding arbitration if necessary.
Tucker said she and Ostrander are very aware that issues could arise because they've never lived together before.
"Being good friends for an extended period of time, you bicker, but then you can go home. But now home is there," she said.
So they've already talked through the basics, like bill paying, which they plan to split down the middle, and chores. The agreement there: "If you make the mess, you clean it."
Still, they will have an attorney draft a written agreement because, as she said, "we don't want to lose a friendship over something that's supposed to be positive."
"One thing we try to do in these agreements is design an exit strategy," said Frederick Hertz, an attorney in Oakland, Calif., who specializes in what he calls "real-estate marriages."
Key issues to iron out in advance include determining when and how the partners can sell their apartment, whether one has the first right to buy the other out, and whether either owner can rent out their apartments. Partners also may want to spell out processes for paying the mortgage and covering expenses, or how they'll share common areas such as a garden or garage.
Because of a limited supply of properties in markets such as San Francisco, Boston and New York, some real-estate marriages don't spring from stable long-term relationships — sometimes they follow a whirlwind courtship, said Hertz, author of "Living Together: A Legal Guide for Unmarried Couples."
"Rising real-estate prices are forcing people into these types of arrangements all over the country," Hertz said "These are people who may be friends, but the Bay Area is full of people who meet on the steps of an open house."
That, however, doesn't seem to be prevalent here. Barbara McMahon, the John L. Scott agent who found Tucker and Ostrander their house, says she's never seen complete strangers buy a home together.
Because Tucker's and Ostrander's goals were clear, McMahon had no qualms about selling the twosome their Marysville house. The two wanted "something they could build some equity in because this is a short-term investment," McMahon said.
Ostrander and Tucker, both customer-service representatives for Washington Mutual, wanted an affordable house with the right floor plan. They wanted a lot of common space where they and their roommates could congregate without having to invade someone's bedroom.
Also important was finding a cosmetic fixer because they figured it would offer the best opportunity to earn sweat equity on top of annual appreciation. They plan to redo flooring, install new kitchen counters and light fixtures, and give the 1,400 square-foot rambler a fresh coat of paint.
"If it's appreciated enough in three to five years," Tucker said, "we'll sell and have down payments on our own houses."
Alternately, they might turn it into a rental property.
Even with the best-considered plans, real-estate agents say unexpected issues are bound to arise between real-estate partners living under the same roof for the first time.
"You're sharing the space, essentially opting to live and spend a majority of time with another couple," said Tammy Shaw, a real-estate broker who bought her own Brooklyn home in partnership with her sister-in-law, Ruthanne Pigotte.
The two women, co-founders of Brenton Realty, bought a four-unit building about three years ago, taking one apartment each for their families and renting out the other two.
"Some of the challenges can be as simple as what temperature the thermostat is set on," Shaw said. "The difference between 68 and 72 degrees can be huge.
"Longer term, life happens: One couple has two kids over the course of a few years while the other couple remains without children. Along with children comes more noise, more storage needs for car seats and strollers. These life changes can cause stresses in an otherwise perfect partnership."
The report includes information from The Associated Press. |
