Better Off Unwed
By Julie Satow
The New York Post
March 11, 2010
Rajni Narasi and John Cryan had spent a blissful year together and were growing more confident with every passing day that “this could be it.” So, Narasi, a petite, brunette lawyer, and Cryan, a tall, handsome financial consultant, made the ultimate commitment.
No, not marriage. They bought an apartment together.
Narasi, 34, and Cryan, 33, are members of a growing sector of the real estate market: unmarried couples who are committing to buying real estate together even before they have legally committed to each other. Factors driving this trend include apartment prices that have fallen dramatically since the height of the real estate boom, a federal tax credit for first-time homebuyers that is set to expire next month, and low mortgage rates.
“There is a perfect storm brewing, with inventory, low rates and tax credits, which provides an incentive for couples who are already in a committed relationship,” says real estate lawyer Tracy Almazan.
In terms of structuring a deal, buying an apartment as an unmarried couple is not significantly different than buying as a married couple, experts say. The primary issue is how to structure the purchase. There are two options: joint tenants with rights of survivorship, or tenants in common.
According to real estate lawyer Allison Scollar, joint tenants with rights of survivorship is akin to the structure used for married couples, with the apartment jointly owned. If one partner should pass away, the ownership of the unit automatically passes to the other partner. With tenants in common, the ownership is divided between the partners.
If one partner passes away, the ownership stake passes automatically to that partner’s heirs (unless it is specified differently in a contract or a will). Tenants in common can be a good option if one partner is contributing more money toward the purchase than the other partner and thus would receive a greater portion of the proceeds if the property is sold, Scollar says.
For Narasi and Cryan, the process was a natural progression. Both had leases expiring within a month of each other, and both had been thinking of buying their own apartment. They decided instead to go for it together and share everything equally, buying as joint tenants with rights of survivorship.
“We had a plan to get married eventually, and this apartment was an opportunity,” says Cryan. “We realized that for the amount we were paying in rent, we could get the benefit of ownership.”
Their new pad, a 1,200-square-foot two-bedroom on East 27th Street, boasts a 300-square-foot patio and a high-end kitchen with Wolf and Sub-Zero appliances. They bought the co-op last summer for $1.055 million — $95,000 less than what the sellers had purchased the apartment for in 2007, according to their agent, Linda Taitelbaum, a senior associate broker at Citi Habitats.
Not surprisingly, prices are a key factor leading many unmarried couples to purchase now. The average apartment sale price clocked in at $1.335 million in the fourth quarter of 2009, a 19 percent drop from one year prior, according to the Corcoran Group.
“There is definitely a sense of urgency to buy now because the market is so good,” says Benny Roitman, 29, who works for Microsoft and is in the market for an Upper West Side condo with his boyfriend.
“Obviously, we cannot get married, so that isn’t a choice,” says Roitman’s boyfriend, Jon Ilani, 27, who works as an agent for Wilhelmina Models. “But we are taking out hundreds of thousands of dollars in loans together, so that is about as committed as you can get.”
Aside from low apartment prices, the first-time homebuyers tax credit (up to $8,000 per apartment, which can be split equally or divided proportionally between the buyers) is also a draw. To qualify, the home must be in contract by April 30 and close by June 30, causing some couples to speed up their searches.
Another factor is low mortgage rates. Thirty-year fixed rates are hovering around 5 percent, but buyers should hurry, warn some experts. A rise in inflation could cause rates to rise, too, and there’s concern that a federal housing program that propped up the mortgage market will soon run out of funding, says Julie Teitel, a senior vice president at GuardHill Financial.
But with so many unmarried couples optimistic they will find real estate bliss, there are some brokers who urge caution.
“You don’t want to be one of the clients who calls me begging to sell the apartment before they even close because they have since broken off the relationship,” says Catherine Cleland, an associate broker at City Connections Realty.
She cites one unmarried couple who bought at the height of the market but broke up last year. Their apartment hasn’t sold, and they are forced to live together in the 700-square-foot space because neither can afford to move out. “Needless to say, they are miserable,” Cleland says.
Still, in this market, there is no shortage of optimism for would-be buyers.
Alpen Patel, a physician, and Rani Khamesra, a jewelry designer, were tired of renting on West 57th Street and decided to buy an apartment. The couple, both 35, bid and lost on one listing and have yet to find a place. So when their lease expired, they moved into a small studio rental down the block on West 56th Street as a temporary solution. Despite being crammed into the single room, they are hopeful for the future.
As Patel points out, living together is already “a big step in our relationship.” And a bigger step is imminent.
“We both feel like, why not invest in something you can actually enjoy?” Khamesra says.
FORGET ME KNOT
What unmarried couples should do before buying an apartment together
* Speak with a real estate lawyer and consider writing a contract that specifies what will happen with the apartment should you break up.
* Decide prior to the closing whether to structure the purchase as joint tenants with rights of survivorship or as tenants in common.
* Co-op buildings might ask you about your unmarried state, although they are not allowed to discriminate based on it. To be on the safe side, if buying a co-op, prepare your answer to such a question before the board interview.
* If you need a mortgage, make sure you have sufficiently strong credit. While banks mostly overlook a person’s marital status, it could become a sticking point in this economy.
* Use a real estate broker who will walk you through all the steps of purchasing. A good broker will also introduce you to a lawyer and mortgage broker who can help.