Buying a Home With Friends or Family

What’s up everybody? Zach McDonald, your real estate agent with Real Property Associates, and I’ve got with me Bill Kessler from Barford Booth. Thanks for joining us today, bill.

Thank you for having me.

Cool. Well, if you don’t mind, can you introduce yourself so everybody can get to know you a little bit, and then we’ll kind of jump into the interview a little bit?

Sure. again, my name’s Bill Kessler. I’m a business and real estate lawyer at the firm of Beford Booth. we are in downtown Edmonds. I do a lot of business law on the transactional side as well as the litigation side, and I do a lot of real estate law on both the transactional and litigation side, and have worked with Zach for several years. And happy to, to be here to talk with you guys a bit about tendencies in common and LLCs and, and people buying properties together in general, I think.

Yep. what, what differences are there? So if we’re in a situation where maybe somebody’s buying it with a friend mm-hmm. <affirmative>, what does, what does that look like? It’s a little different than a dating or marriage relationship. Yeah. What is the difference in how they should approach buying together as, as friends?

Yeah. I’m seeing a big uptick in people buying property together who are who are, who are not dating. and, and they’re not just doing it as business partners, you know, buying an investment property together, that that’s always been sort of common. but very common now for people who want to live in the house, who are buying like two couples buying together, or two single people who are friends buying together simply to be able to afford the place because obviously real estate prices around here so expensive. Definitely. So yeah, as, as you touched on Zack, you’ve got people in other markets like la, San Francisco, New York, that, that have been doing this for a while now, and, and it’s becoming more and more common in Seattle, and I don’t know how many I’ve done over the last year or so, probably a dozen where, where you’ve got friends, whether it’s individuals or couples that are buying together and intending to live under the same roof mm-hmm. <affirmative>.

so it makes a lot of business sense. I think it’s a great opportunity for people mm-hmm. <affirmative>. but it’s gotta be done the right way. And people, people know that intuitively you know, they think that they, they start thinking of possible issues just like anybody normally would off the top of their head. but what’s super important for those couples to do, or, or I’ll say a couple, I’ll, I’ll use an example of two couples, two couples buying together, both intending to live at the property and use it as as their primary residence for tax purposes and otherwise then it is important for ’em to, to do that the right way. Okay. and to have a contract that the

Government’s, so what does that, what does that look like? Yeah. I mean, what kind of a contract should they have in place? I’m assuming it’s a little different than if they were in a committed relationship

Together. Right. Very different. Yeah. So it, they are what what’ll happen when people buy together and they want to live in the property as their primary residence, they, they want to live in it as tenants in common. They wanna own it as tenants in common. and that is it’s a strange term. It’s an old English term. It sounds like you’re renting something. You’re like, tenants, what are we, what does that mean? sometimes some people have heard the, the term joint tenants with rite of survivorship, that’s usually like husband and wife on a bank account. It’s very common, but joint or tenants in common is the default way that two people would own a piece of property. So if, if you and your wife and me and my wife bought a piece of property together and we just, we got under the purchase and sale agreement and it, and it just said our names and then we went and closed it, all, all the buyer’s names are, are right there on the deed.

So it’s, it’s Jane and Bob Smith convey to Bill and Zach and Christina and Holly. It’s just like all our names are right there on, on the deed. So if you, if you look at that deed you take from your seller and your, and on the names are all there tenants in common is, is how you own it. And there’s a whole bunch of laws that just automatically apply to you when you own as tenants in common. and a lot of ’em aren’t really good <laugh> for, it’s okay. They’re not really good. They’re not for, for the, for the, the people who who own together, but it’s how you have to own or it’s how you should own if you’re going in most, in most people’s cases, it’s how you should own if you’re going to claim that property is your primary residence for tax purposes. so that’s, that’s the, the business relationship is called a tenancy in common. And then you have a contract, not an agreement regarding status of property. That’s for couples. Yep. You have a contract called a, a tenant, a tenancy in common agreement, or the, the Langford is a tick a t iic. and that’s your, that’s your, your, your partnership deal with your co-owners is a tick.

So in a tick, what are a couple of the things that are really important in the tick that help make it a little bit more clear as to how the relationships handled versus if you just went ahead and did it without the agreement?

Sure. Yeah. well, the tick answers questions for people and it and it, and it, it kind of narrows the, the focus from what people think of in kind of an amorphous way into, into a more specific a more specific agreement. so it, it answers, it answers what if questions. what if, what if I want to refi and, and Zack wants to doesn’t want to refi. What if I want to sell and Zack doesn’t? what if Zach wants to bring in a tenant and I don’t rent out a room to somebody else, and I don’t what if Zach wants to remodel and I don’t? what if, what if Zach and I get sick of each other <laugh> and don’t want to, don’t wanna live there anymore? Yeah. Right. What so, so it, it answers what if questions who pays what expenses, what happens if I pay more than Zach does?

What happens if he pays more than I do? I tell Zach not to remodel, but I come home and he’s got a construction project going on. <laugh>, I wouldn’t be kidding. Right? What, what, what do we do? what if we just can’t resolve our differences? What do we do if we just, if we have big differences and we can’t resolve ’em, how do, how do we get those resolved? Do we have to resort to courts or is do we have alternative dispute resolution methods that, that we can implement that are, that are streamlined for for co-owners like us and not made for multi-million dollar disputes? So there’s, there’s all these all these questions that can be answered inside that tick. And and it, again, it, it really, it helps people on the front end get, get their, get their focus narrowed and answer those questions and, and get real comfortable with each other rather than just wondering what those issues Yeah, that’s right. It’s gonna go well. That’s right. It does sometimes, right? That’s right. Waking up at two in the morning and go, what a, what about this situation? You answer all those things in the contract upfront, so,

And you guys get paid to think through those things and do this on a regular basis versus somebody just googling

Yeah. That’s the service we provide is, is to give, give them that product, but also to provide independent and detached legal advice and, and judgment that that helps people. Sort of that, that where we can provide that dispassionate analysis and, and also not just the product at the end of the day, but going through the process of creating that product that is going to, to give people that comfort and that peace of mind that they’ve that they’ve addressed all the issues that they need to address before they get in. That’s great. To the get into the relationship.

Yeah. Well, thanks for giving us a little bit of an education on the tick. Thanks so much for watching this video interview with Bill Kessler and talking a little bit about the different entities and ways to buy real estate together. I hope this video was super valuable for you. And if you want to talk more about buying and selling real estate here in Washington State, I’d love to be a resource for you. And if you want to talk with Bill a little bit more about how to structure a purchase or come up with some of these agreements that he mentioned in the video, I’m gonna link up his contact information below, and you can always reach out to me for it as well.