“Barry,” a reader in Reno, Nevada, was “losing hair over this,” he said on a phone call describing the mess he and his former fiancée are in. “Five years ago, planning to be married, ‘Christy’ and I bought a home with acreage in the country. But I admit I was a jerk and kept putting off marriage until she grew tired of my excuses, so we broke up. Both of our names are on the deeds, but only my name is on the loan, and she will not agree on a sales price.”I paid for an appraisal and was given an asking price far higher than Christy got from a lending institution. I then spoke with a lawyer who said that the courts will not generally get involved in situations like this involving unmarried couples. Why, Mr. Beaver, to both questions?”Barry needed to understand why marriage solves these problems.Ownership and the loan are completely separateWithout a written agreement on how property will be dealt with in the event of a breakup, if only one partner signs the mortgage, that partner alone is legally responsible for the entire loan. This is true even if both verbally agree to split payments and do so. It’s also true even if both names are on the deed.About Adviser IntelThe author of this article is a participant in Kiplinger’s Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.Meanwhile, the partner not on the loan has full ownership rights, with no obligation to make payments, because their name is on the deed. “True love” often creates the worst possible mismatch of rights and responsibilities.Do not look to the courts for helpUnlike married couples who have divorce courts to divide property, in most jurisdictions, unmarried couples do not. I can’t begin to count the number of times I’ve heard, “It feels like I am drowning,” when the person on the loan realizes they:Cannot force their ex to refinanceCannot force them to sellCannot force them to move outTheir only option is to retain counsel and file a partition action, at substantial legal expense. The ultimate in getting even?No one wants to feel used or misled, so anyone who commits to marriage and then keeps pushing back the date may have a certain karma coming.When both names are on the title, both parties must agree to sell the property. That gives one partner the opportunity to block the sale just by being unreasonable. Christy can remain in the house and even stop making half of the mortgage payment. Unless Barry makes the full payment, his credit would be at risk, while no damage is done to hers.That said, if both were to stop making payments, this would result in a foreclosure. The property would be taken over by the lending institution, which might negotiate a rental agreement with the occupant — Christy — or simply evict her. Going a step further, unmarried couples, in my experience, never give a second thought to what happens if one of them dies. Here’s what can result:Without a will or trust, the surviving partner may inherit nothingThe deceased partner’s family may inherit their share of the houseThe survivor may suddenly co-own the home with the deceased partner’s familyThe lender may demand a refinance the survivor will not qualify for and lose the houseAsking price can be a huge struggleAgreeing on an asking price can create another struggle, as Barry is learning. I asked real estate appraiser Atom Levi, of A.L. Appraisal Co. in Sacramento, California, who has both MAI and SRA professional appraisal designations, to explain the difference in asking prices.”They serve different purposes,” he told me. “A lender’s appraisal is conservative, intended to protect its collateral and answers one question: ‘Is this property safe security for our loan?’ “Lenders often use automated valuation models (AVMs) or desktop appraisals when possible. These rely on public data, which can miss nuances such as upgrades, views or micro market trends. “However, a private appraisal (the one Barry obtained) is designed to tell us: ‘What is the property actually worth in the current market?’ Independent appraisers work for the homeowner, not the lender, conducting a deeper analysis with a physical inspection, verifying square footage, evaluating comparable sales and considering neighborhood trends more deeply.”How not to become a ‘Barry’Buying a home together before marriage may seem romantic, but it is not. It is a business partnership, and without legal protections, the consequences can be financially and emotionally devastating.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.Any couple considering this dance around land mines needs either:A written cohabitation/property agreement, orA registered domestic partnership, depending on where you liveI advised Barry to retain a real estate attorney, or he may never awaken from the nightmare he created for himself by being a self-admitted jerk.Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.Related Content’They Are Putting Residents’ Lives at Risk’: Behind the Scenes at an Assisted Living FacilityUnconscionable Employment Contracts: What Aspiring Broadcast Journalists Need to Know Before SigningWhy I Believe John Oliver Was Actually Too Kind to ‘Cash Now’ PredatorsAre This Company’s Ads About Its Push-to-Talk Devices Misleading? In My Legal Opinion, Yes, They Are.These 2 Books Prove That Common Sense Still Wins (and They Could Cure Your Financial Pessimism)This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Buying a House Together When You’re Not Married? A Lawyer Explains Why It’s One of the Worst Financial Moves You Can Make
