The Complexities of Joint Ownership

Co-buyers — multiple, non-married buyers listed on a sales deed — are no longer a novelty in the single-family housing market. Co-buyers have accounted for 17.4 %  of purchases nationwide in the first quarter of 2018, up from 14.9 % in 2016. Combined incomes also led to 46 % higher down payments compared to the average of other buyers.

Why co-buy a property?

With interest rates, home prices and competition on the rise, homeowners and homebuyers are looking for viable financing alternatives. Low down payment options can address one barrier to entry for homeownership, but borrowing more money doesn’t address long-term affordability.

Homeowners recognize the value of home equity, as seen by the increase in HELOCs over traditional refis. Co-buyers, on the other hand, are teaming up with friends and family members in hopes of overcoming affordability issues. Their larger down payments also introduce more equity from the start.

How can an agent help?

Co-buying offers a creative alternative, but it also adds additional layers of risk and complexity. Simple details, such as the title, division of payment and responsibility, and what happens when one owner is ready to sell, have real financial and legal consequences.

Buyers need to understand that this is often a game of trade-offs. For example, lenders use the lowest credit score on a joint application to determine the interest rate of a loan. Buyers with significantly higher credit ratings may score better interest rates applying alone. However, combining multiple incomes may put future homeowners in line for more loan opportunities and higher amounts.

Agents can simplify the process by getting involved with buyers early on to determine what makes the most financial sense. Consider introducing the buyers to a real estate attorney to formalize the small, yet significant details of joint ownership.

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