We're just not getting hitched like we used to.
Year over year there are more 40+ year olds who have never been married and who live alone. Their numbers will likely increase - a study of Gen Z/Millennials showed 85% feel no need to ever tie the knot, but they are buying homes together. As a bridesmaid, I am relieved to not have to shop for another hideous dress. As a Realtor, that does change the landscape of how we buy and sell houses.
Joint ownership is not just something these wild and crazy 20-somethings are doing. Far from it. In 2020 only about half of first-time homeowners were married and their numbers spanned all age groups. The trend matters because the real estate legal protections that swaddle married couples are not there for the unmarried.
The Mortgage
As brokers say, "it takes one to buy and two to sell." Only one side of the couple equation needs to be on the mortgage. Even among married couples, this is not uncommon when their partner doesn't work, has a low credit score or debt. Buying a house together is an exercise in standing naked before the numbers. All shall be revealed in bank statements, so best to come clean about your financial picture with your partner before this process starts. Understanding the health of each party's financial house will dictate who applies for the mortgage and whether or not buying a house jointly is the best idea.
The mortgage is who the bank holds liable financially for the loan. The legal right to the property is handled by the title.
The Title
This is where it gets tricky: how will you title the property when you're unmarried?
The title stipulates ownership and determines what happens if one of you dies or you separate. Unmarried couples living in rentals can pack up, take their name off the lease and move on. Once you're both listed on a title, the "decoupling" becomes a legal process. You'll make a decision on how you want to title the property before or on your closing date.
Joint Tenancy is equal ownership through a deed. If one partner dies, the property automatically transfers to the surviving partner. Downside: to satisfy a party's debt, a creditor can get a legal judgement, divide the property and force a sale. Know that you are absolutely assuming responsibility for each other's financial decisions when owning a property through joint tenancy.
Tenancy in Common allows equal or unequal ownership percentages that can be transferred. Downside: no rights of survivorship, in the event of sudden death, the surviving partner does not automatically take over the home. Most couples who have children together want to secure the roof over their heads.
Sole Ownership is when only one partner purchases and owns the property. This clears the other partner for any financial liability tied to the property. In the event of a separation, that second partner has no legal claim to the house.
How do you make this decision? Talk it out with an attorney.
Create a Property Agreement
This conversation is sure to be lively...but it's important. Married couples may have a pre-nup, while the the unwed might want to consider a property agreement in conjunction with the titling of the property.
These outline how much each partner contributed (or will contribute) to down payment, home repairs and other household expenses. It outlines how the property and its contents will be divvied up in the event of a break-up and includes buy-out provisions.
That might feel like making your relationship transactional with a bleak forecast. But I promise that in the event that you find yourselves headed in different directions, you will be glad you have an attorney-drafted, black-and-white directive for both sides to refer to instead of opinions, feelings and best guesses.
The Unthinkable Happens
No, I'm not just talking about a break-up. What if your partner becomes incapacitated? Can you afford the mortgage if they're no longer working? When you're married a spouse has a legal right to make decisions on behalf of their partner. Unmarried couples have to hand the rights to medical, financial and real estate decisions over to their partner's family. This is why wills and Power of Attorney agreements are so important once you start making major financial decisions together.
"He/She Sucks. I Want to Sell."'
I'm paraphrasing...
If only one person owns the house the other would have to prove they had some stake of ownership (see: Property Agreement). If both are on the deed, the legal assumption is 50/50. Battles are usually waged over unequal contributions to the property during its ownership: who paid for repairs, who paid for renovations, who owns that $3,000 built-in espresso machine? Be prepared to provide proof of payment. Big picture: the longer you fight over every penny, the more expensive the process becomes and the more often you have to engage each other.
Next, decide if you both agree to sell the house or if one will buy the other out. To come up with a price you can hire an appraiser. Then subtract the remaining mortgage amount and make adjustments for contributions to determine a final buyout price.
If both partners were on the loan, talk to your lender about removing the selling party. In some cases, the buying party may need to qualify for a new loan or may need to make payments to the selling partner (eek).
Ultimately these decisions are all up to the couple. The unmarried are no more or less likely to need an emergency plan for their relationship than the married. This is no different than planning for any other "worst-case scenario." What's important is that you have the conversation, consider the "what if's."
Fate doesn't have a real estate license and no amount of "Live, Laugh, Love" wall art will make up for a lack of planning.
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