Hot market housemates
The high-priced housing market is forcing some buyers to share the financial burden — and the living quarters — with someone else
Pedro Arrais, Times Colonist
A hot real estate market has made home ownership more difficult, especially for first-time buyers. But some buyers find that they can crack the real estate market if they partner with friends or others. They share the down payment, mortgage and other ownership expenses. They also share in the pitfalls.
Six months ago, Marsha Moore, 41, moved into a $549,000, five-bedroom house with suite. She, along with longtime friend Angie Boocock-Vircoe, 46, and a third party they recently met through a mutual acquaintance, are equal owners in the house they share.
“I am happy to get out of the rent game,” says Moore, a legal assistant at a local law firm who lives with her daughter Sonya, 15. “I always wanted to buy but was unable to do it on my own.”
Moore says that the three get along well. Their advice is sought by friends interested in how the unorthodox arrangement works.
Boocock-Vircoe and her two children, David, 17, and Becki, 13, share the common areas of the house, including the kitchen and living room, with Moore and her daughter. Boocock-Vircoe calculates her one-third share of the $3,000 monthly mortgage works out to $100 per month more than she previously paid for rent on a two-bedroom apartment.
“I would rather pay my mortgage instead of someone else’s mortgage,” says Boocock-Vircoe.
The third co-owner, a single man in his 50s, is very private. He had owned a house in the past but had gone overseas for a few years. When he returned, he found it difficult to re-enter the real estate market. He occupies a lower-level self-contained suite. He was introduced to his two co-owners by a mutual friend.
“I see the arrangement more as a business decision,” he says.
Financial institutions are responding to the needs of multiple purchasers. Vancouver City Savings Credit Union (Vancity) last August began promoting its Mixer Mortgage, a package designed for a “mix of people” who partner to buy a home and take out a mortgage.
“It is a niche product and not for everybody,” says Marge Robertson, a lending manager with Vancity. “It is an opportunity for people who are struggling to buy a home.”
Mixed ownerships account for less than five per cent of all mortgages, Robertson says. She sees a lot of first-time buyers asking about the product, usually purchasers in their late 20s to late 30s.
Depending on the size of the living area, the credit union has seen as many as six co-purchasers on one deed.
But co-ownership can be hard on relationships.
“There can be a lot of fear taking on an asset of that value,” says James Snider, a mortgage broker with Select Mortgage. “I have seen how it can strain a relationship, even among family.” Despite the emotional pitfalls, co-ownership can be a smart move.
Smart co-owners plan as much for the date of dissolution as they do the date of association, says Rob Angus, a managing broker for Address Realty. In his experience, only two of 10 clients who start out looking to jointly purchase property complete the process.
Some home builders say the most common solution to affordability is already on the market in the form of a legal suite, widely referred to by realtors as a “mortgage helper.”
“I think it makes much more sense to buy a house and rent out a separate suite,” says Dave Slang, co-owner of Cadillac Homes. “That way you eliminate sharing the common area and fighting over dirty dishes.”
The popularity of having a suite in a single-family house varies by neighbourhood, says Slang. In Langford, where secondary suites are legal, half the houses he builds are equipped with suites. In a house that has a suite, the only common area is usually the laundry room.
Lawyers report an increase in requests to draw up co-ownership agreements. According to Alan Peterson, a lawyer with McConnan Bion O’Connor & Peterson, the arrangement has increased in popularity in the last four years and now represents five per cent of his real estate business. While each co-ownership agreement is unique, most are fairly straightforward and can be drawn up for between $500 and $1,000, he says.
Any agreement should address how the partners plan to share the house and related expenses, Peterson says. It should also include language on how situations such as death, credit problems and the desire to sell would be handled.
“It’s kind of like getting into business with each other,” says Peterson, a partner with the firm. “People should understand that whatever goes on in their [co-owners’] lives will affect them directly.”
Co-ownership agreement:
- Draw up a co-ownership agreement with advice from a lawyer.
- Outline each individual’s interest in the property.
- Work out an annual operating-expense budget.
- Make provision for emergency expenses.
- Spell out division and access to all parts of the home and garden.
- Consider ownership of furniture and other household items.
- Specify the process if one co-owner wishes to sell his or her part of the property.
Other considerations:
- Take out life insurance so that each share of the home is protected in case of death.
- Set up a dispute-resolution process.
- Set up a slush fund for emergencies.
- Agree on how household tasks will be divided.
- Remember to make provision for pets.
- Make copies of all agreements and distribute them to all parties.
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