Buying a house with a stranger

Published 27th Mar 2007

People have been buying houses with mates for eons. It’s great way to get away from the restrictions of home living and get a foot on the property ladder at the same time. These days the emphasis has largely been pinned on affordability, making it all seem a bit down-market but a fresh approach called co-buying is making the whole idea exciting again. But would you benefit from buying with a stranger or could it all end in tears?

Billed as the latest way to tackle affordability for first-time buyers, co-buying a home with a complete stranger has flashed onto the housing market with the same razzmatazz as speed-dating. Boosted by TV programmes such as the BBC's series Would you Buy a House with a Stranger and Property Ladder, co-buying couples or ‘mortgage-buddies’ have become today’s ‘sign of the times’, where buying and setting up a home is just another click of the button.

Would-be buyers post their details on websites and can search for and contact similarly-minded potential property co-buyers. The stated aims are clear – “Co-buyers are people who are looking to combine resources with others with the objective of purchasing a property in which they will co-habit together and share costs until the eventual resale of the property,” states one website. – but the implication is that the whole process is more like a dating agency and so attracts single people who are maybe looking for company – albeit in a platonic way. (That’s platonic in the modern way with a small ‘p’, you understand.)

Some charge fees of around £10 a month, other are free. Once a likely match has been found, it is up to the individuals to make contact, meet up and buy a property.

To be sure, the websites are entirely clear on the responsibilities of co-buying and very clear too on the precautions that should be taken in order to protect each of the co-buyers while making contact.

Co-buying does offer a possible solution for first-time buyers struggling to get on the property ladder. You can get more for your money and have someone with whom to share the costs.

Combining deposits and earning power means more property options are instantly available and may allow mortgage-buddies to consider a more desirable area to live or a better property.

* Allows people to buy a property several years sooner than they would have been able to on their own - with the added benefit of gaining from the expected continued increase in property prices.
* Co-habiting means home running costs are halved - water rates, gas, electricity, council tax, home insurance.
* Greater potential to share the property even further by renting out a room. Don’t forget that Inland Revenue tax exemption you will get from this!
* Co-buying means solicitor, surveyor, valuation and legal costs can also be shared.
* Co-buying with others presents an opportunity to make new friends, business contacts and familiarise yourself with the property buying business.
* Cost savings means more disposable income to spend on adding value to the property such as a loft conversion, a new pair of shoes or simply for other 'boys toys'.

There are of course, legal consideration to take into account: you must draw up a deed of trust that legally set out how much each partner puts in, how the mortgage is to be split and how any profits will be divided. The exit strategy will need to be defined should one partner want to sell up, and possibly a minimum period before this can be done.

This type of document is needed because the mortgage deeds will only mention who owns the property, not in what proportions.

Mortgage lenders already facilitate the new co-buying trend through joint mortgages and solicitors will be familiar with the other formal agreements such as "Deeds of Trust' and 'Cohabitation Agreements', so there should no be any issue here.

Problems can arise though, and this is where it pays to really try to get to know a potential co-buyer really well before jumping in to the deep end.

* Mortgage responsibility – no matter how the legal documents are written up, a co-buyer will be singly a responsible for the mortgage should his mortgage–buddy default.
* Credit rating – if you live with someone who has or develops a poor credit rating you will almost certainly get affected yourself. After all - you have a legal agreement to share your biggest debt.
* Will you get on with each other? When you are renting you can just walk out, but you can’t walk away from a co-buying arrangement – and this in itself may lead to tensions that are tantamount to blackmail.
* At worst, you could pick a psychopath to share with – unlikely but worrying all the same.

Be open and forthcoming with information about you, your position to buy and your objectives as these are all key to enable you to find the right person that satisfies all your requirements and be a compatible house mate as well as a compatible mortgage-buddy.

Developing trust is crucial for the relationship to work, so providing character references, proof of sound credit history and performing a criminal record check are wise steps to take. Such checks cost approximately £10 and take only a few weeks to process.

Take your time at the outset. Rushing in when it’s all exciting might get things moving but it’s a bit like the well-worn ‘marry in haste – repent at leisure’ quote. There are times when it pays to get things right at the outset. Think of the exercise as more of a 'business venture' and that it is a bonus if your personalities are compatible as this is likely to increase the chances of developing a friendship and co-habiting with minimal problems.

We’ve already mentioned the Cohabitation Agreement. This essentially sets out the rules of engagement for day-to-day living, rights and obligations of each co-buyer and importantly the arrangement for termination of the agreement and terms of the eventual resale of property and division of monies.

But other subjects for agreement may also include:

* Smoking
* Joint purchases
* Joint accounts
* Common expenses - monthly bills, maintenance
* Pets
* Damage caused - time expected to 'make-good'
* Ensuring good personal security
* Home security
* Communal areas décor
* Partners moving in
* Renting spare rooms
* Undesirable behaviour
* Period of notice for resale
* Use of shared/individual equipment and possessions
* Redecoration
* Inventory of individual / shared possessions
* Guests staying
* Parties
* Home, content and life insurance



It’s perfectly possible for more than two people to co-buy a property. The names of up to 4 people can appear on the title deeds of a property. But they don’t all have to live on the property.

A co-investor can buy along with another co-investor and rent out the property, so becoming joint landlords. Or a co-investor could buy with a co-buyer(s) and rent out his/her half – by prior arrangement of course.

So there we are – it’s your call as to whether it is something you’d be willing to risk or not. If you are a loner, someone who likes their own company or have enough money to buy on your own, then co-buying is probably not for you. But if you’re outgoing, not too shy to bear the dating process, but you’re evenings are spent watching property programs convinced that you could do better than those dozy first time property investors, then why don’t you?

Source: ' Move Channel '

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