So you wanna buy a home with family members?

For our family, the decision to buy and own a home together was easy. The rest was not. Here are the questions we should have asked ourselves.

Published on
December 12, 2020
Updated on
October 31, 2022
So you wanna buy a home with family members?
Written by:
Matt Holmes
Matt Holmes
Planned a career in rock & roll, ended up studying economics and working in finance. Started CoBuy with my mom when we struggled to navigate all the moving parts.
Pam Hughes
Pam Hughes
Forty years of experience across finance, real estate, insurance, and construction. Committed to personal empowerment through financial education. Best friends with a small dog known as Francis.

Why would anyone buy a home with family members? For us, it was simple. We love each other, and we enjoy being together. I was pushing 30, and I hadn’t spent time with my folks in over ten years. I wanted to change that. My parents, Pam and Brian, had successfully seen us kids off. We’d all grown up and created lives for ourselves. My career was lucrative, and life was good. One day I woke up and decided that I wanted to be closer to my ‘rents.

At the time, none of us owned a home. The financial crisis had kicked everyone’s ass. It’s not that we couldn’t individually afford to buy a place. We just couldn’t afford to buy something we’d want to live in. So we didn’t. Year after year, this kept all of us out of the market. None of us were happy about that: we all really wanted to become homeowners.

Beyond the social side of things, we recognized the financial benefits—strength in numbers. The idea was on all of our minds. I remember the day I called Pam and Brian to ask what they thought about me coming home. Their reply was quick: “do it.” I packed my things and boarded a flight. After a few meals, chats, and bottles of wine, things got real. We decided to take the plunge.

“Let’s buy a home together.”

The details could be worked out, right? How difficult could it be for three real estate and finance pros? Famous last words.

Based on our experience, here are several questions we should have asked ourselves upfront.

1. What are we looking for in a property?

We had our sights set on a fixer-upper, preferably a duplex. Things were a bit murky beyond that. As we talked through details like neighborhood and budget, our conversations became circular. We’d get going on a theme that seemed to always lead to a tangent.

“We need to be within walking distance of shops, restaurants, and parks.”

“…but a garage for three cars is more important…”

“If one unit is bigger or has a view…”

Frankly, we were failing. The conversation digressed into hypothetical details—many hypothetical details. We debated the finer points of the perfect home and happily ignored the important stuff.

⚠️ Caution

More than 3 in 4 homebuyers who purchase with a partner argue about the attributes of their ideal home or the purchase process. Source: Zillow 2020

Naturally, we then hit the pavement. It was time to house hunt! Over the next two months, we viewed at least 30 properties. Some of these fit the rough criteria we had set in terms of neighborhood and price point. Many did not. We learned a lot: mostly about what we didn’t want.

Looking back, we made more than a few mistakes. Namely, we didn’t:

  1. establish priorities
  2. set bright lines or deal-breakers
  3. have the money talk
  4. consider how to structure, operate, or protect our little joint venture

We did eat a lot of free cookies at open houses (JK).

2. What are each of us putting in and getting out? What does each person expect in return?

In our situation, each of us brought something unique to the table. All three of us were contributing cash to the down payment and closing costs. Like many family members who buy together, the contributions were not equal.

My parents brought cash, they were both employed, and they had good credit. My stepdad, Brian, also happens to be a builder. In fact, Brian and Pam had co-founded and run a small homebuilding company that won awards from Remodeling Magazine and the local Master Builder Association. Their expertise was worth a lot. It would give us a leg up during the home search and enable us to find a fixer property with unrealized potential. We’d also be able to cut costs.

My contribution was the cash I had saved after nearly ten years working abroad. When I quit my job and flew back to the U.S., my personal credit score didn’t fly with me. Neither my employment status nor my lack of domestic credit history would be useful on a mortgage application.

Despite being very close to one another, we didn’t have the talk. We failed to sit down and define exactly what each of us would contribute—and when. In a home purchase, an extra $100k upfront is meaningful. We also failed to work out how we’d split ownership. How could we? We hadn’t solidified contributions. This made it impossible to even consider how we might split the profit (or loss) if and when it came time to sell the home. Whoops.

3. What’s the end game?

So how do we manage this thing? Honestly, the day to day aspects of co-ownership didn’t cross our minds. We hadn’t considered how we’d divide expenses, make payments, or split responsibilities. Taxes? Accounting? Finances? Nope. Planning for unexpected situations like death or job loss? Nope.

The a-ha moment came late in the game. It was a Friday night. The atmosphere was fun, and the excitement around the dinner table was palpable. As we imagined how great it would be to find the perfect place at an incredible price, we stumbled upon a kink in our plan. I had assumed the whole thing would last two to five years max. We’d sell the home, make some money, and go our separate ways. Great plan. My parents had an entirely different idea. For them, this was a long-term investment. None of us had considered that something so seemingly obvious might be a deal-breaker.

⭐️ Pro tip

Buying together doesn't have to mean living together. It's common for a family member or friend to participate in a joint purchase as a non-occupant co-owner. Regardless of who lives in the home, circumstances can change. Someone may decide to move out. A change in occupancy doesn't necessarily force a sale of the home.

Family members should talk about how to deal with different situations that could affect co-ownership, including whether they'd be willing to rent out the home (or part of it).

Better, together.

Living with family members is not a new concept. So why is it so complicated to buy and own a home together? It really comes down to the fact that laws, business practices, and the mortgage market have all evolved around the idea of a nuclear household.

When we decided to buy a home together, we had no idea what we were doing. We were excited. We made assumptions and glossed over the complicated stuff because, frankly, we had never done this kind of thing before. The real estate pros we approached treated our situation as standard. It wasn’t! Looking back, I can’t blame them. It’s not logical to expect traditional agents or loan officers to act as co-ownership experts.

Today we live in a beautiful home outside of Seattle. There’s fresh air, tons of outdoor space for the dog, and a salmon stream that runs through the woods in our backyard. Will we always live together? Who knows. For now, it’s great—and we feel confident about having covered our bases.

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