Buying a House with Friends in Washington State
Are you trying to buy your first home? Do you peruse prices on Redfin with incredulity – then weep softly? Are you unwilling to commute from a shack on the outskirts of North Bend? Like many in your shoes, you might consider buying a home with friends. Residential co-ownership among friends is becoming an increasingly-common phenomenon (https://www.wsj.com/articles/millennials-dream-of-homeownership-11633698676).
Owning real estate with friends can be a great way to buy an otherwise-unattainable property. But intuitively, people inclined toward this option begin thinking of potential pitfalls:
– What if my friends want to sell and I want to stay?
– What if I pay more down than they do?
– What if they quit paying the mortgage?
– What if they want to remodel and I don’t?
– What if I want to refi and they don’t?
– What if I want to rent out a room and they don’t?
– What if they want to sell their interest to someone I don’t like?
– What happens when stuff breaks?
If everyone is living at the property, you should likely avoid a LLC (here’s a good piece by my partner on that issue: https://beresfordlaw.com/should-i-put-my-primary-residence-in-an-llc/). Rather, you will likely need a Tenants In Common Agreement (“TIC”). This is your partnership deal with your friends, and it governs your relationship regarding the house. Given the necessary complexity of that document, and the high value of the property, you should avoid self-drafting. A real estate lawyer can ensure the TIC is drafted carefully, tailored to your situation. You will end up with a good product on which you can rely in the event of a future dispute. But perhaps more importantly, you and your friends will squarely address potential future issues UP FRONT. These are issues which many prospective partners typically consider only in a nebulous manner if they do not seek legal counsel.
Just like any partnership, your “housing partnership” with your friends will be stronger from the outset when you proceed with a vision made clearer through a lawyer helping you create a quality, specific TIC. Please feel free to contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100 if you are considering buying a house with your friends.