Co-Buying a Home
- As tenants in common (TIC), and
- As joint tenants with right of survivorship (JTWROS).
U.S. states) no choice but to own equal interests in the property, 50/50. If you buy a home with two others, you each own a one-third interest, and so forth. Upon the death of one joint tenant, the remaining owners gain the deceased owner’s interest in the property. This happens automatically, with no need for a court or probate proceeding. In fact, even if the deceased owner wrote a will specifying that the property was to pass to some other person, that request would not usually be allowed.
Both tenancy in common and joint tenancy give each of you an “undivided interest” in the property, meaning you can both use and enjoy the entire property. If one of you wanted to sell, that person couldn’t simply divide the property in half and sell it, but would instead have to sell his or her tenancy or interest in the property. The buyer would gain the same rights as the seller had. And if you’re buying a second home or investment property, you’d both be entitled to rental income from the entire property in proportion to your ownership share.
Talk is cheap, and what’s worse, easily forgotten later. That’s why you need to draft and sign a co-ownership agreement, to help head off confusion or misinterpretation down the road.
When you co-own a house, getting out of the deal may not be so simple. Neither of you probably want the other one to be able to sell his or her interest to any old third party (assuming there’s even a market for a partial interest in a house). But that’s exactly what can happen, because regardless of whether title is held as TIC or JTWROS, each co-owner does not legally need the other’s approval to sell his or her interest in the property.
- How will you fairly assess the property’s value?
- Does the selling co-owner have to accept the buyout offer?
- What if the remaining co-owner can’t come up with sufficient funds to buy out the selling co-owner?
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