A sobering and sad news report from the Canadian Press today about the inevitable rise in distressed home sales to occur in Metro Vancouver and across the country.

See: 

Homeowners on the brink face tough choice of selling home as mortgage payments climb: Other steps to take before pulling the trigger

Rising interest costs due to higher mortgage rates is beginning to take a toll on some homeowners. Combined with the high overall inflation and cost of living pressures facing everyone, carrying a mortgage and home is becoming too much for some property owners.

This is leading to some home listings, in order to make ends meet. Some homeowners are forced to sell because they have consolidated debt as best as possible, perhaps sought credit counselling and tried to negotiate the best mortgage possible through a broker. And still the math may not work to continue on with homeownership.

I have and continue to advocate that homebuyers maintain a strict adherence to tradtional affordability metrics in order to sustain homeownership over a full cycle of homeownership at any one particular home. I counsel and remind homebuyers on the on-going (and rising!) costs associated with homeownership, beyond just the mortgage payment. 

Being house poor should not be anyone's goal. Maintaining financial balance is critical to ensuring that one can committ to other financial goals like retirement savings, emergency funds, perhaps funding a child's education etc.

Downsizing is also a great option if you are feeling a financial pinch that you truly know you cannot endure over the long-term.

Living within one's mean may not always be fun but it is the most empowering, liberating and sustainable way to go financially.

It's no secret that homes in Metro Vancouver and the Fraser Valley housing markets are expensive. Affordability for buyers, especially first-time buyers, has gotten progressively worse over time. For this reason, more and more potential homebuyers in the Vancouver area housing markets are contemplating buying a condo, townhouse or single-family detached house together. In other words, through co-ownership, where every buyer gets a certain percentage share of ownership of the home.

Real estate company Royal Lepage Canada has recently released results of a survey they commissioned, showing some interesting facts about co-ownership. Click here for the report titled 

Canadians buying homes with family, friends to combat housing affordability woes

Highlites of this report included the following:

• 76% of Canadian co-owners cite a lack of housing affordability as a major motivator for choosing to co-purchase a property
• Almost one third (32%) of co-owners who were motivated by low affordability purchased their home after the Bank of Canada began raising interest rates in March of 2022
• Nearly two-thirds (65%) of Canadian co-owners say they own a single-family detached property
• 56% of co-owners co-own a home with their parent(s) or parent(s)-in-law; 18% co-own with their adult child(ren)
• Nationally, 6% of homeowners co-own a property with someone other than their spouse

WHAT TO CONSIDER IF YOU ARE THINKING ABOUT CO-OWNING A HOME IN METRO VANCOUVER

Buying a home in the Lower Mainland or Fraser Valley through co-ownership can be a beneficial arrangement, but it also comes with its own set of considerations and potential challenges. Here are some key factors to keep in mind when thinking about co-owning a home:

1. Compatibility: Co-owning a home requires a strong level of compatibility and mutual understanding between the co-owners. Make sure you have compatible lifestyles, financial goals, and expectations for the property.

2. Legal Structure: There are different legal structures for co-ownership, such as joint tenancy and tenancy in common. Each has its own implications for ownership rights and responsibilities. Consult with legal professionals to determine the best structure for your situation.

3. Ownership Shares: Decide on the ownership shares each co-owner will have. This typically corresponds to the amount of financial contribution each person makes towards the purchase.

4. Finances: Clearly define how the purchase costs, ongoing expenses (mortgage, property taxes, maintenance, repairs), and potential profits or losses will be shared among the co-owners.

5. Mortgage: Determine how the mortgage will be handled. Will you co-apply for a mortgage, or will one person secure the mortgage while others contribute to the payments?

6. Exit Strategy: Plan for how you will handle situations where one co-owner wants to sell their share or exit the arrangement. Will the other co-owners have the first right of refusal to buy the departing owner's share?

7. Resale: Agree on how the property will be valued if a co-owner decides to sell their share. This can be based on current market value or an agreed-upon formula.

8. Decision-Making: Establish a process for making decisions about the property, such as renovations, repairs, or other significant changes. Determine whether decisions will be made by consensus, majority vote, or another method.

9. Use and Occupancy: Outline how the property will be used and occupied. If it's a vacation home, for instance, establish a fair way to allocate usage time.

10. Legal Agreements: Draft a legally binding agreement that outlines the terms and conditions of co-ownership, covering all aspects from financial contributions to dispute resolution. It's advisable to work with a lawyer experienced in real estate and co-ownership agreements.

11. Communication: Open and ongoing communication is essential for a successful co-ownership arrangement. Regularly discuss finances, property management, and any concerns that arise.

12. Insurance: Obtain appropriate insurance coverage for the property. This can include homeowners insurance and, if applicable, landlord insurance if you plan to rent out the property.

13. Contingency Planning: Consider potential scenarios, such as the death or incapacity of a co-owner. Address these scenarios in your legal agreements to prevent complications.

14. Personal Circumstances: Be aware that your personal circumstances might change over time, affecting your ability to contribute financially or occupy the property. Plan for these changes in advance.

15. Professional Advice: Seek guidance from legal, financial, and real estate professionals to ensure you have a clear understanding of your rights, responsibilities, and the potential risks involved.

IS CO-OWNING RIGHT FOR YOU?

Co-owning a home in the Vancouver or Fraser Valley real estate market can be a successful arrangement when approached thoughtfully and with clear communication. However, due diligence and comprehensive legal agreements are crucial to avoid potential disputes and ensure a smooth co-ownership experience. The values (and therefore stakes) are very high with an asset class as expensive as Metro Vancouver housing. It is important to carefully plan things out in advance. This will help to ensure that your friendships and family relationships can remain positive as co-owners before, during and after your time owning together.