Do You Need a “No-Nup”?
Right now, I have three groups of clients who are looking for their first place together. But they have yet to tie the proverbial knot.
In my book, The Irreverent Guide to Real Estate, I actually have a chapter called “Buying in Sin” where I tell people who are not yet married how to intelligently buy a place together. And I suggest that they sign an agreement – you know, a “what if”.
And my sister, Joan, has given it a name. Its a “No-Nup”.
And having one makes total sense if you are buying with anyone other than a spouse. This includes a sweetie, a sibling, or any real estate partnership that does not include a marriage license.
I suggest a sit down with a real estate attorney who can explain the issues and draw up an agreement that will cover however you decide to address them. Laws vary from one jurisdiction to the next, to it’s important to be sure you are covered wherever you are buying.
The big questions marks in any purchase are what happens if the partnership breaks up or what happens if one of the partners should die. These things are resolved by laws that govern purchases by married couples – at least in the absence of a pre-nup.
These are the kinds of things that a NoNup should cover:
- How much ownership will each of you have? While some couples go with equal shares, it’s common for one to have more money for a down payment. Or perhaps one has a much higher income and can pay a larger share of the mortgage.
- How will you take title to the property? This will depend on whether you will have equal shares and how you plan to handle inheritance issues.
- What happens if one of you croak? However you take title, this would be the time to make sure that you have a will that reflects your desires. If you take title as joint tenants with the right of survivorship, your interest would go to your partner and vice versa. If you take title as tenants in common, the decease’s share would go into his or her estate, meaning the heirs could force a sale.
- And if you break up, how will you handle the house or apartment? It’s not quite as simple as breaking a lease. Who moves out and who stays? Will you sell the place or will one buy out the other, and if so, how will the equity shares be calculated? What if you are under water when it’s time to sell? How do you handle the short fall.
Most of my couples are not siblings. They are not just business partners. And it’s really hard for them to even think about this stuff when they’re smitten crazy and have a world of wonderful possibilities in front of them. Still, most agents who’ve been in the business for any length of time have at least one or two cautionary tales among their past clients – I actually have about four of them.
Buying a house or apartment is always a huge undertaking, even when you are buying it alone or with a spouse. And selling the place can be just as daunting. It’s the largest financial transaction that most of us enter into, so it makes sense to be smart about how you go about it.
This means that your supporting cast should include, not only a wonderful real estate agent, but a wonderful attorney as well. It’s not romantic, but it is smart.
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