Overview

Next, let’s check out some of the most common risks, organized by stage of co-buying. For each of these, we’ll follow a similar format:

1️⃣ Risk: Action or issue that causes problems.

2️⃣ Potential outcomes: How the action or issue manifests.

3️⃣ Solution: Suggested approach to manage this risk.

Plan & Build Consensus Stage

❗ Risk: Co-buyers not on the same page

Potential Outcomes: Confusion, delays, deal collapse

Solution: All co-buyers should research and educate themselves on the process, requirements, and risks. Better information leads to improved decision-making. Afterward, complete the CoBuy Wizard worksheet and discuss. Iron out any differences or concerns before moving forward.

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❗ Risk: Lack of open communication between co-buyers

Potential Outcomes: Mistrust, delays, deal collapse

Solution: Set aside time to discuss everything in this course together, complete the CoBuy Wizard worksheet, and be open with one another. Some topics, like financial matters and ownership, are easier to talk about when you have a structured plan in front of you. We call this “sterilized decision-making.”

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❗ Risk: Co-buyers can't reach agreement

Potential Outcomes: Stalled progress, emotional strain, deal collapse, financial loss

Solution: If, after all co-buyers in your group complete this course and follow the prescribed steps, you’re still unable to build consensus on the key inputs and decisions, consider whether it makes sense to move forward. Pulling the plug is preferable to completing a purchase only for differences to cause problems later. If co-owners can’t resolve differences amicably, the forum may shift to a court of law. Litigation is expensive ($50k to initiate) and can last for many months or even years, making selling the property impossible.

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❗ Risk: A co-buyer faces legal issues (e.g., ongoing litigation)

Potential Outcomes: Legal complications, delays, mortgage application challenges

Solution: All co-buyers must fully disclose any pending charges, recent credit events, and other extenuating circumstances. These issues will surface during the mortgage application process and lender verification checks. Many problems are solvable if identified early.

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❗ Risk: Advancing too quickly in the process

Potential Outcomes: Delays, deal collapse, mortgage application challenges, financial loss, legal issues

Solution: Follow the process outlined in this course. If all co-buyers confirm readiness, and your objective assessment around your viability and eligibility is positive, the probability you’re ready to move forward is > 90%.

Get a Joint Mortgage Stage

❗ Risk: One co-buyer has poor credit, or worse, no credit

Potential Outcomes: Higher interest rates, mortgage application challenges

Solution: Depending on your circumstances, your loan officer may advise you to leave that person off the loan. If they don’t have a credit history, they won’t be able to participate on the mortgage. Otherwise, there are accelerated paths to building credit. Speak to your loan officer about your options.

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❗ Risk: Change in financial circumstances (e.g., job loss)

Potential Outcomes: Delays, mortgage application challenges, deal collapse

Solution: Avoid any actions that can impact your finances or credit. If you anticipate a change, consult your loan officer ASAP. Even seemingly positive changes can hurt your ability to borrow in the short term. Maintain stable employment, don’t take out any new loans, and avoid opening new financial accounts.

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❗ Risk: Poor communication with the Loan Officer

Potential Outcomes: Delays, misunderstandings, mortgage application challenges, deal collapse

Solution: Communicate early and often with your mortgage lender through the end of closing. Be transparent, ask questions, notify your loan officer if anything changes, and be prompt in your individual and collective responses. Many of your communications will be time-sensitive and directly impact your loan application. Accuracy and completeness are also important. Failure to disclose and misrepresentation of financial information can have legal consequences.

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❗ Risk: Failure to secure mortgage preapproval

Potential Outcomes: Delays, deal collapse

Solution: Make sure you secure mortgage preapproval before starting the home search. A prequalification letter is different from preapproval. Preapproval happens after a mortgage lender completes employment and financial verifications, and it carries considerably more weight.

Navigate the Search, Negotiate, & Transact Stage

❗ Risk: RE agent

Potential Outcomes: Poor negotiation, overpaying, delays, deal collapse

Solution: Choose an agent with specialized experience in co-buying. Use the selection criteria provided in this course and the sample questions to shortlist and interview candidates. All co-buyers should participate in this process and agree on which candidate to select. You’re not looking for a good agent. You’re looking for the best fit for your needs. Prioritize experience, track record, availability, communication, transparency, and local market knowledge. Avoid using a friend or relative.

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❗ Risk: Unrealistic expectations

Potential Outcomes: Time wasted, market changes, group discord, deal collapse

Solution: Set realistic goals and expectations upfront about your budget. Sense check your budget in the context of the current conditions in your local housing market. The best RE agents and loan officers can advise you here, but ultimately, the market decides. You can derisk in advance by agreeing with your co-buyer(s) where and to what extent you are willing to compromise if needed.

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❗ Risk: Deal heat

Potential Outcomes: Poor decisions, overpaying, deal collapse

Solution: Stick to your agreed search criteria and budget, and don't rush. A helpful mechanism is to agree in advance to hold one another accountable. Sometimes, it makes sense to calibrate your search criteria. Any changes to the agreed search criteria should be intentional and involve all co-buyers.

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❗ Risk: Multi-party complications

Potential Outcomes: Delays, misunderstandings, market changes, deal collapse

Solution: Every aspect of the home purchase transaction—communication, logistics, and execution—is more challenging in a co-buy scenario compared to a married couple. Get ahead of these issues by defining a communication plan and choosing a “group leader” to serve as a primary contact for your agent, lender, and others.

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❗ Risk: Undetected property issues

Potential Outcomes: Additional costs, deal collapse

Solution: Leverage your RE agent, perform inspections, and conduct thorough due diligence. According to one report, 60% of home sellers admitted to selling a home without disclosing an issue to the buyer(s). Failure to disclose material information to buyers is the most common reason listing agents get sued.

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❗ Risk: Title search issues

Potential Outcomes: Legal disputes, financial loss, deal collapse

Solution: A problematic Title search can reveal problems like liens, easements, or even ownership disputes that could derail your purchase. Always obtain Title insurance and consider hiring a real estate attorney to review the Title report if it is complicated. All co-buyers should be aware of the Title status. Address any issues that arise to prevent delays or deal collapse.

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❗Risk: Property is not insurable

Potential Outcomes: Deal collapse, financial loss

Solution: Verify your property’s insurability early in the process. Climate change impacts insurability and costs in some areas of the country. Check with your preferred property and casualty insurer to determine whether your search areas have problems. Order your free CLUE reports for each individual in your co-buying group to be sure that you are insurable, too.

Structure Your Co-ownership Stage

❗ Risk: Differing views on equitable ownership (i.e., what’s “fair”)

Potential Outcomes: Conflict, delayed decisions, legal disputes, deal collapse

Solution: This is a giant red flag if you can’t agree on a clear division of ownership after this course and structured discussion. Consider deferring your purchase.

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❗ Risk: Tenants in Common without a clear estate plan

Potential Outcomes: Legal complications, unintended beneficiaries, probate

Solution: Create an estate plan and communicate it with your co-buyer(s). Each co-buyer should name a beneficiary and document this in a Will, Simple Will, or similar. A Beneficiary Deed may be another option. You should also create a Co-ownership Agreement and align its contents with those in your estate planning docs. Make sure to understand estate planning and inheritance: if a co-owner dies, you want to avoid dealing with costly probate proceedings or ending up co-owning your home with a stranger.

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❗ Risk: Overcomplicating the ownership structure

Potential Outcomes: Legal and financial complexity, increased costs, deal collapse

Solution: Stick to a straightforward ownership structure unless there's a compelling reason to do otherwise. It keeps things simple, clear, and enforceable.

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Develop an Exit Strategy Stage

❗Risk: Lack of an exit strategy

Potential Outcomes: Stalled sale, financial expense, financial loss, relationship strain, legal disputes

Solution: Create a plan for how to unwind co-ownership in different situations. In each scenario, specify essential details, including timelines, mechanics, and how proceeds will be distributed. Make sure all parties align and get it in writing.

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❗Risk: Failure to properly document an exit strategy

Potential Outcomes: Stalled sale, financial expense, financial loss, relationship strain, legal disputes

Solution: Outline your exit plan in a Co-ownership Agreement. Make sure that all co-owners review, date, and sign. Execute your Agreement and store it securely, ensuring easy access for all parties.