Canada’s scorching hot real estate market continues to defy expectations due to a lack of supply and pandemic pricing fluctuations leaving many first time buyers out in the cold.

Discouraged by the seemingly eternal seller’s market, some buyers have decided to sit on the sidelines and wait until the market cools. For those who are not content waiting, there may be another option: Co-ownership.   

Co-ownership Defined:

Co-ownership is defined as a “shared living arrangement where two or more people own and live in a home together.”

Source: (https://www.ontario.ca/document/co-owning-home)

Although co-buying is unconventional, it may be a buyer’s only ticket into the market; however, before signing on the dotted line, buyers should understand the pros and cons:

Advantages

• Pooling resources and entering a co-ownership can help first-time buyers begin to build equity.  For buyers with a limited budget, sharing the burden of what otherwise would be a massive mortgage is a huge plus!
• Feeling cramped? Co-ownership paves the way for many buyers to gain more space than they may have had in a rental.  With pooled resources, buyers that may only have been able to afford a small footprint (if any), may find themselves in a position to purchase larger, single detached homes.
• Greater access to neighbourhoods:  While sellers are likely ecstatic with record selling prices, buyers feel frustrated by their lack of options.  Even if they are able to scrape together the funds necessary for a downpayment and qualify for a mortgage, first time buyers and those with tight budgets, may not be able to move into the areas of their choice.  Entering a co-ownership widens the buyer’s access to safer and more desirable locations. 
• Sense of Community or Belonging:  Co-ownership guarantees that someone will always have a friend or roommate close by.   For individuals who do not relish the idea of living alone, co-buyers have the opportunity to form their own community or circle of support. 

Disadvantages

When friends and roommates choose to buy together, it is essential that the parties clearly define boundaries and stick to any agreements that were made before they purchased the property. As long as you and your “property partner” have a sense of mutual respect and are transparent when it comes to finances and responsibilities,  co-ownership should be smooth sailing.  Before the property is purchased, a formal agreement should be drafted by a lawyer outlining the financial and ownership responsibilities of each party.  If a disagreement takes place months or years into ownership, each party should have legal recourse if one of the owners does not hold up their end of the deal.  Not everyone is cut out for co-ownership.  It is important to understand the possible disadvantages:

• Disposition of the property:  Have a clear agreement regarding the options that will be made available to each owner should one of the parties want to sell the property. For example, will the other owner be offered the option to purchase the dwelling first or will the owners agree that as soon as one party is ready to sell, the other will agree to do the same?   If the choice is to sell the property, have a clearly defined plan as to how you want to approach the sale (ie. when to list, how to manage showings, who you will choose as an agent, etc)
• Home Maintenance:  Who will be responsible for the care and maintenance of the property?  In other words, who cuts the grass, gardens, and cleans common areas?  Divvying up these laborious tasks could lead to disagreements. Hammer out these decisions and draw up a formal contract before you agree to buy together.
• Renovations: The costs and inconveniences that arise with home renovation could definitely become a bone of contention for co-owners especially when purchasing an older home that is in need of updating.  Having a plan before you purchase regarding the allocation of funds for renovation is key to keeping the peace with your fellow homeowner and avoiding disagreements about which renos are priority and which ones are not.

In a hot seller’s market, co-ownership offers some buyers a pathway into the market, but it is not a wise move for everyone.  Before deciding to co-buy, make sure that you consult with one another about your expectations and goals for the purchase to ensure that you are  both on the same page. 

Looking to buy? Considering co-ownership? Contact Scott and Emily. They would be happy to discuss your options.