Unmarried Couples Buying a House: What Should They Know?

It has been said that falling in love consists of uncorking the imagination and bottling the common sense, and for many couples, buying a house together is an experience driven by excitement and emotion, especially in a market as hot as ours.

When a married couple in Texas buys a house, community property laws offer each person equal rights, responsibilities, and protections for their investment. But with more than 12 million unmarried partners living together in the U.S., and almost 13 percent of those being same-sex couples unable to get married in some states, it makes sense that the number of unmarried couples buying a house together is increasing.

For the unprepared couple, buying a house may mean buying trouble, too, as they fail to plan for the possibility of the relationship failing.

Dallas Realtor Franceanna Campagna has observed that firsthand with her clients.

“The home buying process is such an exciting and usually happy one, particularly for the first-time homebuyers, that people don’t like to drag in the three Ds of real estate: death, disaster, or divorce,” Campagna said. “However, I always advise clients that financial planning and estate planning is the best way to protect themselves and their investments from future unknowns.”

Campagna and her partner bought a house together in East Plano about 18 months ago. Both women are listed on the title and note, and they did something real estate attorneys advise: they set up estate planning documents that spell out rights and responsibilities for the property and mortgage in the event of a “future unknown,” like those three Ds of real estate.

According to research in the Annual Review of Sociology, 55 percent of different-sex cohabiters marry within five years of moving in together, but another 40 percent break up. So what happens to those 40 percent if they’ve bought a house together? And what about same-sex couples who can’t marry in Texas?

“Basically, what the law says is that you are joint tenants,” said Dallas family law and divorce attorney Lisa McKnight. “If you buy something before you’re married, it’s like a partnership, and each partner has the unequivocal right to partition, which means to sell if they want to.”

McKnight said a common scenario is for a house to be financed in both partner’s names and one person wants to keep it after a breakup, but can’t qualify on their own to refinance the mortgage. The other partner can then force a sale.

“There’s always a fight about reimbursements—one person inevitably says they’re owed more from the sale of the house because they paid more for this, that, or the other,” she said. “Everybody shows up with [their paperwork], and it’s kind of like a battle of the receipts.”

The nature of a breakup makes the scenario especially unpleasant in many cases, McKnight said.

“There are people who can treat it like a business decision, but usually somebody’s heart is involved and it becomes more like a divorce,” she said. “People are using their emotions, not logic, and they want their pound of flesh. It’s about all the unresolved issues that one person has. When you mix that in a business transaction, there are going be problems.”

So what’s a solution? A partnership agreement, sometimes called a “real estate prenup.”

“Come up with a partnership agreement about the property that says how you’re going to deal with it [in the event of a breakup],” McKnight said. “If we want to end the partnership, how does the sale of the house take place? What kind of things are we going to reimburse? How do we decide on a sales price? The person who’s still in the house often doesn’t want to sell, goes passive aggressive about it, and won’t agree to a fair sales price—sometimes you have to get a stick of dynamite to get that person out.”

A partnership agreement should make things clear about what’s reimbursable and what’s not.

“Like say one person paid the utilities and the other person paid the mortgage—you want to get that clarified so the person paying the mortgage doesn’t look for reimbursement,” she said. “In the end, when people start hating each other, they start making lists of reimbursements, like ‘I paid to put the new deck in and you owe me for that.’”

A partnership agreement allows for other possibilities as well, like forming a limited liability partnership (LLP) together before buying a house, but Campagna says she doesn’t see that much among romantic couples.

“I have helped lots of clients buy and sell homes over the last 11 years,” Campagna said. “Investor clients are more likely to utilize a…LLC entity. From my experience, unmarried couples generally tend to purchase together without forming a partnership.”

The bottom line is this: create good communication and clear expectations about who pays for what, and what happens if one of the three Ds of real estate happens, McKnight says: “Get your understanding in writing—an oral agreement is not good enough for real property—agreements regarding real estate must be in writing.”