PROTECTING YOUR ASSETS: 5 STEPS TO DEVELOPING A GROUP HOME PURCHASE AGREEMENT
Purchasing a home in a group is a common reality these days. In fact, almost 40% of people looking to purchase a home today, whether as a primary residence, rental property, or vacation spot, are looking to make the purchase as a group . Whether the group consists of siblings, parents and their children, a group of friends, or any number of group combinations, whatever the reason, the percent of multiple parties purchasing one property is on the rise.
While there are many benefits to purchasing a home with a partner(s) (putting a 20% deposit down becomes easier, more people to manage the property, etc.) make sure you stop and think about the following to avoid any costly mistakes, or perhaps worse, broken relationships with friends and family.
Developing a Group Home Purchase Agreement
- Invest in the agreement development: Be prepared to spend a significant sum, both in time and costs to draw up an agreement that all parties agree to. This will help your group deal with day to day issues on a harmonious basis. You also risk spending a lot of money individually in a court fight should the purchasing venture dissolve in the future without an agreement in place to provide a legal mechanism to make the process as stress free and inexpensive as possible
- Invest in a lawyer: While you could draw up an agreement on your own, it is better to have it drawn up through a lawyer. Here you will benefit from your lawyer’s experience in similar situations and knowledge of any inherent legal issues that could blindside one or all of the buyers in your future. This way you will have considered any legally relevant issues that could come up in your group home purchase, operation, and sale.
- Listen to all parties: Help the lawyer get a clear understanding of what all the parties want. The lawyer will know what the usual areas of desire and contention are, but by outlining each other’s wants for the purchase and writing this down, you will be able to gain an understanding as to each other’s goals with the property. If they are the same, great. If not, then you now have the ability to move forward with the lawyer knowing each other’s intentions with the property OR walk away from purchasing with the partner to avoid any future issues with the property.
- Outline ways to leave the partnership: Consider with the lawyer all the reasons you and all other parties could have for wanting to sell their portion of the home, or sell the home altogether. Everything from mutually wanting to sell, to one person wanting to buy the other person out of their portion, to friendships gone bad, take a moment to assess all possibilities and have an understanding of what each party can do in each circumstance. Make this part of the agreement. This can save many headaches, arguments, and hurt feelings because these strategies are already developed and agreed to by all parties with the help of the lawyer.
- All parties must sign: An agreement, signed by all parties, is a legal mechanism that will help avoid a long, expensive process should / when you decide part ways. Parting ways does not necessarily mean you are parting on poor terms. It simply means that one or more of you wants to move on. However, particularly if the moving on is because of a poor relationship between the parties, the agreement you set in place could assist in avoiding a long, stressful, expensive court battle.
Purchasing a home, whether on your own or in a group, is making substantial investment. Be sure you protect your assets by setting up the proper agreements, understandings, and procedures before making a significant purchase. If you are thinking about making a group home purchase and need a bit more information about an effective agreement, feel free to contact Mainwood Legal at 403-720-2712 or email@example.com for guidance!