VOL. 42 | NO. 5 | Friday, February 2, 2018
Unmarried couples beware when purchasing a home
“Love and marriage, love and marriage” and so the song goes, but it makes no mention of home ownership, nor is there any mention of divorce. The number of marriages peaked in the United States in the period following the end of World War II. I suppose there was quite a bit of catching up as the number rose 33 percent over the next year.
Divorces also peaked during that era, and for the next 36 years the rates of marriage and divorce followed the same path: When marriages increased, divorces followed suit, slight pun almost intended.
In 1980, things changed as the number of marriages declined and the number of divorces continued to rise. So, the number of people marrying fell and the number divorcing rose, leaving fewer married couples in the US.
Since then both marriages have dropped and divorces increased. There are 30 percent fewer marriages each year than there were in 1860 and three times the divorces, CDC National Center for Health statistics show.
This leaves many unmarried couples sharing shelter, at times purchasing shelter. More than ever before, based on this data. When those who intend to spend at least a few years together beginning to consider home ownership, they should be aware of the ramifications of the transaction.
Attorney Jerry Patterson, one of the most highly regarded closing attorneys in the city’s history, offers sage advice to hundreds of homeowners each month. His advice to unmarried couples purchasing homes is that a buy/sell agreement be signed at closing.
Patterson says “the terms and conditions of the sale of the property should be arranged so that if either party decided to terminate the partnership, either party would be able to purchase the other’s interest in the property.”
Having led many through the process, Patterson recommends that such an agreement would explain a way the property would be evaluated and that each party would be assigned a percentage of ownership. When the value is reached, then the partner could buy out the other for the percentage that they had agreed upon earlier.
For example, if the cash to close was $50,000 and one party delivered all the cash, that party may or may not be allocated a higher percentage of ownership.
“The most important thing to remember,” Patterson says, “is that when the parties split, the mortgage holder must be made aware and must release the party that has no ownership following the split.”
If one partner offers to buy the other’s share for $75,000 and makes that payment, the person with cash should insure that loan reflects the new ownership in order to protect that partner’s credit rating.
As important, Patterson says, is that the party making the payment gain clear title to the property.
Simply because Ms. Smith pays Mr. Jones $75,000 to go away, Mr. Jones should be certain that his name is no longer on the loan. If Ms. Smith misses a payment and Mr. Jones’ name is still on the mortgage, his credit score takes a disastrous hit.
If Ms. Smith does not take measures to remove Mr. Jones from the title and sells the house years later with a $1 million profit, Mr. Jones might reappear and want his half of the $1 million.
Even in the best case. Mr. Jones would be required to sign the sales document acknowledging that he is relinquishing his ownership.
Married or not, both partners should be aware that the buyers will be required a name affidavit certifying that they were known by other names in the past. In many cases, the name could be the maiden name of the wife, for example.
Patterson says that on several occasions, the affidavit has revealed past marriages that one partner had not felt the need to mention up until that point. Often, that document alone can necessitate an implementation of the buy/sell agreement assuming that the purchase occurs.
Sale of the Week
While Zillow and Trulia are the favored sites of most home shoppers, Redfin is on the rise and making some noise. All the while Realtracs remains the most reliable as it is up-to-date information and is not melded with information from courthouses and other random sources. Dare I write it? Fake home data.
With the lack of inventory continuing to haunt homebuyers and Realtors alike, going forward I will keep score of new listings versus closed sales and pending sales in the area that houses the featured sale.
Realtracs drew various geographic boundaries years ago separating the city’s neighborhoods. Devoid of gerrymandering or any other socio-economic practices, the areas within the Nashville city limits run from Area 1 through Area 8, with Area 6 being assigned to the East Nashville neighborhoods including the Lockeland, Eastwood and Inglewood properties.
Last week in Area 6, there were 42 homes listed and 30 closed, a number that would seem to bode well for those hoping for a replenishment of the inventory. But there is a hiccup, and that is that 70 homes went under contract.
To recap, 42 homes entered the market, and an even 100 homes left the market. For those who are lacking mathematical skills, that is a loss of 58 homes from inventory for the week in one area.
One of those leaving the market is 1303 Eastland Avenue, which was listed at $643,000 and sold in 13 days for $620,000. Both the sellers and their wise listing agent, Angela Wright with Parks, realized that 13 days is the new 130 days when it comes to days on the market, hence the significant price drop.
Alex Brandau IV, the fit-to-be-bow-tied Realtor, represented the buyers as he and his team so often do. Brandau hails from Keller Williams Realty and comes from a long line of Realtors, a clan that has sold East Nashville real estate for eons, even before it was cool.
The house was sold in 2015 for $432,500 and had a darker décor and a two-car garage that the current sellers had transformed into a two-story, functioning, impressive studio and picked up $200,000 for the brightness and perhaps the studio.
Built in 1899, the home has 2,495 square feet plus an additional 800 square feet in the studio. Boasting the original chestnut woodwork, clawfoot tub and some of the older light fixtures, the home sold for $258 per square foot on a lot consisting of .27 acres.
There are those tempted to sit out the boom and purchase when the bubble bursts. The sales history of 1303 Eastland Avenue may provide some insight as to how property values have fared over the ages in East Nashville.
In 1988, the house sold for $31,000. That owner held it two years and sold for $101,500 in 1990. The $101,500 buyer sold in 1994 for $102,000. There was the savings and loan scandal during that period, and most of country’s real estate properties lost value. This property held its own.
If the owner had been able to hold on, he would have seen an enormous increase in 1996 when the house sold for $171,000, grossing $69,000 in his two years of ownership. The new owner held for two years and sold for $192,500 in 2000, a $21,500 increase.
The 2000 buyer must have made some improvements. She sold for $432,500 some 15 years later, only to see the house sell for $620,000 last week.
A $31,000 house in 1988 transformed into a $620,000 home in 29 years. That same appreciation – at least the dollar amount, $589,000 – will repeat itself over the next 29 years, I guarantee it.
If not, call me and I will buy you dinner. Or have your artificial intelligence call my artificial intelligence and arrange a meeting.
Richard Courtney is a real estate broker with Christianson, Patterson, Courtney, and Associates and can be reached at Richard@richardcourtney.com