Home buying for unmarried couples
Cynthia E. Brodrick

No, we're not talking about a wedding -- we're talking about buying a house together when your marital status is still legally "single." While you don't have to be married to own a home together, you do need to realize that buying property is likely to be just as complicated, expensive and life-altering as any marriage.

"It's harder to break up co-ownership of a house than it is to get a divorce -- longer, more expensive and more difficult," explains Frederick Hertz, co-author of "The Living Together Kit" and an Oakland, Calif., attorney specializing in real property matters for unmarried couples, gay and straight.

Perhaps you are avoiding "legalizing" your relationship because you don't feel the need to have a piece of paper to prove your love. That's fine. But when it comes to spending and borrowing tens or hundreds of thousands of dollars on a home, you really want some pieces of paper to protect your combined interests. Many issues that are taken for granted for married couples need to be cleared up for unmarried lovebirds.

"People don't want to sully the romantic part with the legal stuff, but remember that marriage is a legal contract," explains Tina Tessina, author of "The Unofficial Guide to Dating Again." Without the marriage license to bind them, an unwed couple has to establish its legal relationship on its own. The Long Beach, Calif.- family psychotherapist explains that unmarried couples "have to find a way to guarantee the same protections as a marriage contract gives you."

Get it in writing

"If there's a problem later on, it's important to have standard legal contracts so that things don't get out of hand," Tessina says. A contract can cover many aspects of unmarried lovers' living arrangements -- and it's even more important when buying a house.

"The main problem is that unmarried couples often have different arrangements and have not thought about their arrangements," Hertz explains. He adds that this is not just an issue for 20-year-olds living in sin. More than ever, older couples are skipping the marriage part, yet their lives are complicated with assets, debts, offspring and social expectations.

"It's OK to have agreements, but it needs to be in writing," Hertz says.

Here are a few things to consider when writing up a contract to buy a house together:

Shares. A couple with widely divergent incomes and assets may want to approach buying the house differently than an even, 50/50 split. If one person is supplying the down payment, it might be agreed that this person owns a larger portion of the house. If the other person will be adding value to the house over time by fixing it up, then the contract might reflect this person's growing interest in the house.

Splitting up. Breaking up is hard to do, and even harder when there's a house to divide. Even at this exciting time together, you need to plan ahead to a time when you may be arguing over who gets the vacuum cleaner and visiting rights for Fifi the poodle.

"Think of it as any business deal," says Jonathan Taylor, a real estate attorney with Taylor, Gruver and McNew in Wilmington, Del. "When you go into a business situation, you should have a plan in place for dissolving the business. It's easier to do in the beginning when everyone is getting along and it's a happy deal."

If the partners have contributed uneven amounts of money toward the house, they should plan ahead as to how they'll get the money back if they sell the house after a break up. Or as attorney Taylor says, "The ratio of equity put into the deal is the ratio gotten back in the sale."

Buying out. Another factor to keep in mind is that in the course of breaking up, one person may decide to keep the house. How is this to be handled? Does the partner moving out get half the equity? Or half the equity minus real estate agent's commissions and state fees that would be paid if the house had been sold?

Even more complicated would be a situation in which both individuals want the house -- without the other one in it. To avoid a potential "War of the Roses" battle over your former love nest, it would be good to figure out a method beforehand to decide who gets to keep the house in the event of a breakup.

Finding a house built for two

Now that you've planned for the future, back to the present: actually finding a house and purchasing it. Things should get easier from here, but not necessarily.

Hertz says there is no law preventing real estate agents from discriminating against unmarried couples. Admittedly, this may or may not even be an issue for a straight couple. "Most unmarried couples can pass as married couples -- [marital status] never even comes up. But it does for gay couples." Obviously a gay couple is more likely to encounter potential difficulties from narrow-minded brokers. More than likely, however, a good businessperson isn't going to ruin a potential sale.

Financing can be another sticky area for unwed duos. Again, there's nothing preventing a lender from discriminating against an unmarried couple. However, even with a non-judgmental banker, unmarried couples can encounter problems when applying for a home mortgage.

Hertz says, "They each have to apply as separate applicants. Problems with one person's application can be much more difficult to overcome. Some banks require both partners to qualify."

Banks generally consider a married couple as one unit, allowing one person's qualification to allow the couple to buy. Meanwhile, banks usually require all unrelated owners of the property to be on the loan as well, so it's not possible to "hide" one person's mediocre credit history.

"It's mostly the banks don't know how to process [unmarried couple's applications]," Hertz says. "They don't know how to deal with unmarried couples."

One more small warning: Believe it or not, there are still state and local laws on the books against unrelated people living together, much less buying property together. Thankfully, these antiquated laws are not enforced, but you might want to be aware of them.

Joint tenants on the U.S.S. Survivorship

It happens to the best of us: death. And you need to be prepared for this inevitability. How will you want the property to be handled upon the death of one partner? You can cover this issue in the contract the two of you set up ahead of time.

When married couples buy a house, they are usually automatically made joint owners with rights of survivorship. But unweds need to make the decision of how to set up the title of the property. Basically you have two choices:

Joint tenancy with right of survivorship (or joint ownership). This is the title that married couples often get if they don't choose otherwise. Joint ownership makes things easier for the surviving spouse or partner in the event of death. There is a faster transfer of the property because the house automatically goes to the surviving partner. Inheritance tax is avoided because the house doesn't go through the estate.

However, one partner can not sell his or her share, and cannot choose to leave his or her portion of the house to anyone other than the other owner. Obviously, with this setup, it's assumed that the two owners will not break up and will own the property together until one dies. Hard to believe with today's divorce rates that someone still thinks that way.

Tenants in common. This title choice provides a lot more flexibility, making it possible for there to be multiple owners with unequal shares. Additionally, each owner can bequeath his or her share to whomever he or she chooses. This makes it critical that each partner has a will. Tenants in common with no rights of survivorship is a good choice if one partner wants to leave his or her share of the house to children from a previous relationship. However, the issue of inheritance taxes raises its ugly head, because that portion of the house goes through the dead partner's estate.

When two become one

If wedding bells do ring in your future, you can choose to keep your contract and house title as before. However, Taylor recommends, "If the couple does get married, they should re-title the property as husband and wife. Then if there is a judgment against one of them, it will not affect the house. Whereas when they're unmarried, creditors of one can attach to their portion of the house."

Buying a house involves mounds of paperwork and a lot of painstaking research into your financial particulars. Whether you're married or not, once you've made your big decision to buy, a heart-to-heart discussion about the nitty-gritty details is in order. As Taylor notes, "It doesn't matter what the rules are, as long as it's agreed to."

Happy house hunting!

-- Posted: July 8, 1999