Many couples make the choice to live together before getting married. If you are planning to buy a house with your partner, ideally you should both sign a joint home ownership agreement. After all, this is one of the largest investments you will ever make. If things don’t work out you don’t want to rely on a verbal agreement.
If you are living in a house that you bought as a couple and split up, what happens to the house? In most states, if both names are on the deed, the presumption is that you are equal partners unless you have signed some other agreement. Of course, life isn’t usually that simple. Sometimes only one person contributes to the down payment or one partner may have contributed a much larger share than the other. Or perhaps one partner has invested a disproportionate share of time and money in home improvements. Another possibility is that only one name is on the deed but both have contributed to the mortgage payments and improvements.
Now what? If you have a joint ownership agreement, the process will be much simpler because you have agreed in writing how those issues will be addressed. If not, one possibility is to value each partner’s contribution in terms of down payment, improvements, mortgage payments, etc. and then use those figures to determine the ownership percentage of each partner. You may need to enlist the advice of a real estate professional and or a mediator if you disagree about the value of home improvements, market value, etc.
Once the ownership ratios are established, the next step is to decide whether you will sell the property to a third party or if one of the partners will be staying and buying out the other’s interest. It will be less costly if one partner buys out the other’s share because you avoid all the costs associated with selling a house, particularly, real estate commissions. Often, the amount of the real estate commission will be deducted from the market value of the house even if there isn’t a third party sale. Another deduction might be made for any deferred maintenance costs. The market value less the commissions and deferred maintenance costs will then be allocated according to the ownership shares of each partner.
If you need to speak with a family law attorney regarding a joint home ownership agreement, contact Adkins Law. We have locations in Huntersville and Ballantyne for your convenience.