Friends join fortunes to buy a home Caution advised before making leap

July 26, 1992|By Vikki L. Ramsey | Vikki L. Ramsey,Cox News Service

ATLANTA -- For the past 14 years, Gloria Perry and Troy Harrison have grown to know each other pretty well.

So well, in fact, that the platonic friends made a commitment more commonly reserved for married couples. In June, they closed on a brand-new two-bedroom house that they bought together.

"I don't know of too many other people who aren't married who could do this," said Ms. Perry, a 35-year-old Atlanta shipping manager.

But times may be changing.

Unrelated professionals in their mid-20s to mid-30s, for example, have teamed up to buy houses quite often during the past three years, said Brooks Campbell, vice president of MetroFirst Mortgage in Atlanta.

By combining their incomes, they are better able to come up with the down payment. Also, the likelihood of qualifying for a mortgage increases.

"It's a way to create an instant two-income family," Mr. Campbell said. "We've done many friend-and-friend loans and have seen little delinquency among them."

Lifestyle changes have contributed to the number of joint purchases. Many people are marrying later in life, and some are choosing not to get married at all. Others are forming intimate relationships without getting married.

Yet they still want to take advantage of today's relatively stable -- not skyrocketing -- home prices, low mortgage rates and the tax deductions enjoyed by homeowners.

But before taking the leap, there are several factors to consider.

"With a house, your money is tied up together, so you have to know a person very well," said Mr. Harrison, 34, who is optimistic about his purchase with Ms. Perry. "I don't recommend it to everybody."

For example, if one person moves out, the financial obligations remain with the person who stays.

That's why before buying a home with someone, you need to consider the likelihood that a job transfer or marriage may take that person away.

In the case of an unexpected split, the remaining tenant may be forced to sue to retrieve owed mortgage payments.

The only protection is a written agreement that makes the person who leaves still liable for his or her half of the mortgage payments, said Carol V. Clark, a litigation attorney who specializes in real estate.

To protect yourself, she said, you should try to talk through all the scenarios: what could happen and the resulting conflicts. Then, have a lawyer draw up an agreement to document the resolutions.

The legal document doesn't keep either person from breaching the agreement, she said. "But, it does keep them from thinking they can get away with a lot."

Ms. Clark said she tries to discourage lawsuits between co-owners by getting both people to talk through their dispute. Many times, she said, the solution is putting the house on the market.

But buyers beware: The house cannot be sold without the permission of the absentee owner.

While the idea of teaming up is based on convenience, it is a financial obligation and should be entered into very cautiously, said Seth Weissman, an Atlanta real estate attorney.

Each person should be represented by an attorney and enter into a partnership agreement, he said.

"But these arrangements," he warned, "are only as good as the people who entered into it and the attorneys who drew it up."

Some industry experts believe that a lack of commitment between two unmarried people can create problems because buying a house is a long-term commitment.

"Married couples assume that progress and equity is being created for the entity, while single people are not as committed to a long-term relationship to stay together," Ms. Clark said.

It's best to approach joint purchases as a business partnership.

"Basically what we have is a business arrangement so long as our split is amicable," said Jennifer Lee, 25, who closed on a house a month ago with her boyfriend, Jonathan Clark, also 25.

After two years of renting together, the couple decided that buying together "was a smart financial move."

The purchase of the house is a separate commitment from the relationship, Ms. Lee said. And a decision to get married will not hinge on the house.

"We have had joint banking accounts for about two years, so we were already financially joined at the hip," Mr. Clark said.

Still, buying with a friend is "a big, scary step," he added, admitting it is not a good idea for everybody. "I would say it can be a good idea, and it was with us."

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