Williams Teusink: Legal Advice for Unmarried Homebuyers

Atlanta Real Estate Forum Radio

Eric Teusink, managing partner and real estate attorney with Williams Teusink, joins host Carol Morgan for this week’s Atlanta Real Estate Forum Radio episode. Teusink discusses the legal ramifications of unmarried homebuyers purchasing real estate together in this podcast segment. He explains that it has become common practice in the last 10 to 20 years for people to purchase homes outside of marriage for legal and financial reasons. There is a trend toward delaying marriage and starting families as well, but individuals often don’t want to put off buying their first home with their romantic partner. There are also some homebuyers seeking residences with their friends. Why? Because it makes the significant investment of purchasing a home more affordable for everyone. “I think a lot of different trends are at work here and giving rise to a lot more issues in the back end.” While Teusink mostly runs into homeownership concerns with younger clients (27 to 35 years old), he still receives calls from older clients with the same issues. “Folks who have more lived experience are maybe going to be more cautious, although who knows,” said Teusink. “But when you're talking about 20-somethings and young 30- 30-somethings, they may throw a little more caution to the wind.” What are some of the common legal pitfalls for unmarried couples who buy property together? Taking property as joint tenants with a right of survivorship “What Georgia law presumes when two people buy a house together is that they are tenants in common, and that means you each divide ownership,” said Teusink. “You each own an entire interest in the property or one half of an entire interest.” If one partner passes away, this legality transfers the entire interest to the other partner. While it seems great in theory, Teusink warns against it and says that unmarried homebuyers should consider other options. Not having a legal agreement on the front end In case of a break-up or other issues, Teusink suggests that couples create a property ownership agreement before buying a home or moving in. With the help of an attorney, homebuyers can define what happens if they break up. The property ownership agreement document also memorializes important details like how much each partner paid on the front end and ongoing payment responsibilities. “Because often one partner might pay $80,000 towards a down payment while another partner pays $20,000,” said Teusink. “Obviously, you're going to want that down payment to come out in a similar manner on the back end.” What conversations should unmarried homebuyers have before they purchase a property together, and what should they consider including in their property ownership agreement? Before buying a home, both partners should establish what happens to their home in the event of a break-up. There are really two options: sell the house or one partner moves out. If the latter is decided, it is best to plan in advance for the remaining partner to buy out the other partner. “You would use a provision similar to what you would use in a business agreement called a Texas shootout provision,” said Teusink. “And that's a provision where I can say, Okay, I offer to sell you my portion for X dollars. If you accept that, then I have to sell it to you. If you don't accept that, then it is deemed that you are now making an offer back to me that I can buy you out at that same price or something.” One of the major issues with this homebuying dynamic is the long-term effect on the partner that moves out. If both partners are on the mortgage, but one partner no longer possesses the property, that individual can run into problems if the mortgage isn’t being paid. Not only does that detail affect you financially, but it can also shift your credit score and prevent you from buying another home later. Other considerations in the property ownership agreement include short-term and long-term illnesses because,