Caveat Co-Owner
For Unmarried Buyers Sharing a House Purchase, the Price May Be Right -- Until the Relationship Goes Wrong

By Sandra Fleishman
Washington Post Staff Writer
Saturday, June 24, 2006

Architecture school pals Dave Delcher and David Tracz bought a District fixer-upper in 2000 as a way to get a toehold in the housing market. Since then, the friends have rehabbed the vintage Victorian and married their girlfriends, but they all still live and own together.

The percentage of people who, like Delcher and Tracz, buy homes with someone other than a spouse is small. Real estate agents and lawyers say, however, that the number has ticked up noticeably in hard-to-afford areas such as Washington.

Such arrangements are often the choice among unmarried couples, gay or straight, and they can allow friends or relatives a chance to buy a home they couldn't afford otherwise. Real estate lawyers, though, say they continually hear horror stories about deals going bad. They say the potential for disaster underscores the need for buyers to understand the various ways of holding ownership and to have agreements spelling out details.

Delcher and Tracz didn't have a written agreement, but they say everything has worked out fine. Still, the two men and their wives -- Delcher married architect Roxanne Wallace in 2003, and Tracz and interior designer Kim Sullivan tied the knot last fall -- are finally considering what they jokingly call "the divorce," meaning the sale of the property.

It's not because the five-bedroom house in Bloomingdale, which has tripled in value, feels cramped. It's because the couples, all in their thirties, are considering the next step: parenthood.

"It's been kind of fun . . . to be able to have friends living in the same house. It will actually be a little sad when we leave," Delcher said.

Laurie Ann Rose, who lives on 12 acres in Fauquier County, can't say the same. She says she "couldn't believe it" three years ago when her ex-partner asked a court to force the sale of the house she had bought in 1986 and to make her give up half the proceeds. "It was a nightmare," Rose said.

After three rounds of litigation to block the sale of her house and $200,000 in legal fees, Rose says she has learned how important paperwork can be if you share a house with someone to whom you're not married.

"The moral of the story is, 'Get it in writing,' " said the 49-year-old mother of three. "Don't do anything for love. . . . If someone truly loves you, they're going to sign on the dotted line" about how to split the costs as well as share the profits.

Delcher and Tracz don't disagree about the wisdom of putting pen to paper. It's just that they never got around to it. "We're pretty good friends, pretty even-tempered, and we knew we were not going to stab the other in the back," Delcher said.

There are no hard numbers on how many unmarried people have bought together in the Washington area. Nationally last year, 61 percent of buyers were married couples and 30 percent were single; that leaves 9 percent who were either unmarried couples or in some other situation, according to the National Association of Realtors.

Lawyer David S. Jenks of Avenue Settlement Corp. in the District said: "A third of the transactions that we do are unmarried people, people thinking that they're buying their first condo with their dream lover and that everything will be great. But usually it is a disaster." He estimates that as many as 15 percent of buyers in the District are not married, including "a lot of brothers and sisters who own together."

Hispanics, who account for a growing share of the overall population, often buy with members of their extended family to make the loan numbers work, according to Timothy Ready, director of research at the Institute for Latino Studies at the University of Notre Dame. They buy with nonrelatives at about the same rate as non-Hispanics, he said.

People who buy together have often talked through what will happen if one person wants to leave, local real estate lawyers and other experts said. The problem with oral agreements, they said, is that about half of all relationships, like half of all marriages, end badly.

When unmarried co-owners decide to go their separate ways, the same kinds of problems come up as when married co-owners split, Alexandria lawyer James C. "Beau" Brincefield Jr. writes on his Web site. "Unfortunately for unmarried co-owners, however, they don't have the benefit of either the protections provided for married couples by [state law] . . . nor do they have an established body of case law to rely upon as married couples do."

Said Jack M. Guttentag, a mortgage columnist and professor of finance emeritus at the Wharton School of the University of Pennsylvania: "I frequently get letters from people who have bought homes together who are not married -- usually after they decide to split and they find out what a quagmire they're in because they didn't realize that they didn't pin down the details first."

Guttentag said most such purchases he hears about are by people who haven't taken the trip down the aisle, rather than by those who have teamed up solely for financial reasons. He suggests that may be a function of the times. "When I was a young man, nobody did that. It was viewed as shameful. It was viewed as 'shacking up.' . . . Now it's viewed as routine."

It's so routine that Chevy Chase real estate agent Patricia Kennedy has a chapter on "Buying in Sin" in a book she's written and hopes will be published soon. She writes: "It is often easier to get out of a marriage where you don't own a house than a relationship where you do. . . . Marriages in the United States last an average of seven years. When you buy a house, you make a commitment to send huge checks to your mortgage lender every month for the next 30 years."

Kennedy recommends that unmarried couples have one person buy the place if possible. If not, she suggests they sign what she calls a "pre-cohabitation agreement."

Brincefield calls his version of the paperwork "a home-sharing agreement." Settlement lawyer Jenks said, "It's like having a prenup for your house."

Whatever it's called, it lays out who pays what for the down payment, closing costs, mortgage, taxes, insurance, fees, utilities, repairs, improvements and other expenses. And it specifies who decides what needs to be improved or repaired, and when.

It also spells out who signs the note for the loan and is thus obligated to the lender; the circumstances in which one party can sell or transfer interest in the property, force a sale or refinance the property; and how sales proceeds will be divided.

"A big problem that we see a lot," Jenks said, is that "people buy as friends because individually they could not afford to buy. They sign the note together, and then one decides 'I'm going to move.' But you can't just release the loan, you have to refinance" to get a name off the mortgage.

Then the remaining owner "finds that they may not be able to cover the mortgage on their own, or qualify for it."

If the person who leaves remains on the loan and has credit problems, "that impairs the other person's credit, too," Jenks said. "Once you sign a note with a co-borrower, you're really in bed with that person until the note is paid off or you or the co-borrower is released from the note."

One of the major issues co-buyers need to decide is how they will take title.

Married people often own as tenants by the entirety, a form that is not available to unmarried people. Instead, they choose between tenancy in common and joint tenancy.

If owners are tenants in common, then upon the death of one, his interest passes to his estate, not to the other owner. "If something happens to one of you, let's say a bus runs over the lover, you end up owning the property with the estate of the deceased," Jenks said.

Writes Kennedy: "If you're not the first to go, your common-law mother-in-law could become your new roomie, or she could force you to buy her out or sell the property."

If the buyers are joint tenants, also known as joint tenants with right of survivorship, if one owner dies, the other automatically gets the partner's share. This form is often used by gay and lesbian couples.

District residents Trip Nesbitt and Cy Ardoin created a domestic partnership agreement and mutual wills to ensure that each would be the other's heir. When they bought a three-bedroom house in Crestwood last year, they took ownership as joint tenants, "specifically because if Cy's parents . . . should all of a sudden decide that their son is sinful and not give any respect to our relationship, I would be out half a house," Nesbitt said. "Which is what would happen if we bought as tenants in common."

Their agreement spells out that the ownership is 50-50 and says either one must give written notice if he wants to sell, Nesbitt said.

The couple had two meetings on the paperwork with a Baltimore law firm that specializes in transactions for gay and lesbian couples. "It took about three days," Nesbitt said.

"There were a lot of questions raised that we hadn't expected, but fortunately we were both on the same page," he said.

Though it may seem like tempting fate to go without an agreement, some buyers say their experience has been positive.

Monique Laventure and Lauri Swift, who have been friends since ninth grade at West Springfield High School, last year bought two properties together after Swift separated from her husband. One was a Reston townhouse that they purchased to live in. The other was a new house in West Virginia that they purchased as an investment.

The two women see each other a lot; they also work together. Now that Laventure has married for the second time and moved herself and a teenager out of the Reston house, the friends are talking about how to end their joint ownership of that property.

"We don't have anything other than a verbal agreement," Laventure said. "She'll probably refinance and give me some of the equity."

The two have seen what can happen to friends over real estate -- a third partner in the West Virginia house changed her mind and the women stopped being friends for "a long period of time," Laventure said. But the two remaining friends say their relationship works because of mutual trust and respect.

"We've known each other for thirty-something years -- she's like a sister to me," Laventure said.

The same kind of mutual trust and admiration is at the heart of the house that District lawyers Sterling Ashby, Eve Runyon and Obiamaka Okwumuaba own in Mount Pleasant in Northwest Washington. They do have an agreement in principle, saying that it would take two people to force the sale of the house during the first four years of ownership, and only one person after that, but they never actually signed it.

By pooling their money, the trio bought a bigger, better place than any of them could have alone.

"Instead of each buying 1,000 square feet on the outskirts of Washington, we were able to buy a five-bedroom, five-bath house in the heart of the city for $900,000," Ashby said.

Runyon and Ashby say the house has also provided an opportunity to build other kinds of partnerships, both for business and for community-building as African Americans. The two, both in their thirties, have held fundraisers for nonprofit groups at their house and discussed community projects, such as starting a debate team at Kelly Miller Middle School in Northeast Washington.

Others haven't been so lucky. Julie Ross-Rose, a teacher who bought in July in Columbia Heights in Northwest Washington with two lawyer friends, said the situation seemed ideal when they started. Before teaming up as a trio, she and one of the women had joined forces but were stymied by the hot market. "The more we looked, the less we could find in our price range," she said.

When the third woman found a house she wanted, she offered the other two the chance to go in on the deal. "On paper it seemed like a great idea," Ross-Rose said. The 4,200-square-foot house cost $775,000; it had six bedrooms and the potential for a basement rental.

Trouble was, the house needed a total renovation, and the other two women "couldn't agree on anything," Ross-Rose recalled. "They were two very strong women who were pretty used to making their own decisions. It was hard for them to work together."

After an "awful summer," the woman who had found the house bought out the other two in November. Ross-Rose stayed on as a renter until last month, when she moved in with her boyfriend. "It was a learning experience," she said. "Would I do it again? I'm not sure. The worst thing about it is, I lost a friend."