So, in a recent article from Nerdwallet that got a lot of coverage by media outlets, their writer extolled the virtues of an unconventional way of entering into home ownership.

The trend is called “co-buying” and lest you think that this is some new cool way of buying a home; this was always an option, but a risky one.  “Co-buying” is just a different way of saying that you are having someone “co-sign” for your loan.  Basically, the idea is that you purchase a home, which is financed using one or more co-signers who have no legal connection to you, such as a friend or a non-spouse family member.  Remember, this is different from a spouse where there are set legal rules (such as contribution, community property, community debt, and equity rules) that govern that relationship.  Remember, a marriage still means something.  A spouse can't simply walk away from a home without any consequence from a divorce court.  But a boyfriend, girlfriend, ordinary friend, or a sibling could absolutely do that.

As a Bankruptcy attorney for over 27 years, I can categorically say that co-signing is generally a terrible idea unless you have absolute trust in the person that you are co-signing with.  Of course, when I looked up the credentials of Nerdwallet's “mortgage expert”, she has a degree in sociology.  I couldn't find any relevant experience, outside of being an online influencer, writer, and blogger that qualifies this person to give you advice on home mortgages.

This is not meant to be a dig on this particular writer.  It is a cautionary tale about listening to anecdotal experiences from select people before making a huge financial decision.  Her thesis needs to be carefully examined and scrutinized.

Let me start by saying that there is nothing illegal or inherently wrong with co-signing for a loan.  I have seen many instances of parents, for example, co-signing with their child for a home loan to get them on their economic feet.

These advocates of “co-buying” make it sound like an easy way to seize upon a hot real estate market that you would not ordinarily be able to access because of your credit.  There are even “co-buying strategists” online that will encourage you to “co-buy” a home but all they do is extol the virtues and none of the liabilities associated with this option.  This is particularly popular among increasingly single women who are not waiting to find a committed romantic partner and want to enter the home market on their own.  While on the surface this might seem like a good solution to a problem, it is absolutely a serious financial risk, despite not seeming so at first glace.

Let's put it another way, using an analogy.  According to the Pew Research Center, marriage is on a dramatic decline in the United States.  Among the top reasons given by young people on why they do not want to get married is feeling “financially unprepared” for marriage.  OK, so the typical home mortgage is for a 30-year term.  How many people do you know that have been married for 30 years?  But on the one hand while getting married seems like a serious economic risk to a large segment of the population, that same group will have no problem co-signing with a “friend” on a 30-year loan for the biggest purchase they will ever make in their life.  How does that seem like a good idea?

Remember, that when you purchase a home, it isn't just a home.  There are ongoing costs beyond the mortgage, including upkeep, property taxes, property insurance, and perhaps home owners' association expenses.  What happens when one half of this pair wants to move on?  If you couldn't finance the property on your own, who says that you will be able to refinance the property and buy them out?  What happens when you can't get along with the co-buyer on fundamental questions?  Who is going to live there?  Who can store their belongings there?  How are expenses going to be allocated?

Essentially being a co-buyer on a house is the equivalent of acquiring a business partner, and those relationships oftentimes don't work out.  Someone that you may get along with on many different issues may not be someone that you will get along with when it comes to money.

And that is when the Bankruptcy attorney steps in.  Every Bankruptcy attorney has dealt with this type of scenario.  Perhaps we can protect the equity in the home if both people are living there, but what if your “co-buyer” files for Bankruptcy and doesn't live there?  There would be no “homestead exemption”.  It is possible that if there is enough equity for the Bankruptcy Trustee to sell the home you might lose the home.  What if one person wants out?  I have had to file lawsuits in my career for “partition by sale”, which essentially means that one person wants out of a home while the other person is unwilling to sell.  How do they get cashed out?  What if one person doesn't want to contribute anymore?  How do you legally enforce that obligation?  What happens if one of the co-buyers loses their job?  What happens if only one of the co-buyers lives at the property; do they pay rent to the other co-buyer?  What happens if one of the co-buyers gets married?

Co-signing is an option when all other options are not available, but to treat it as an effective wealth accumulation strategy is fraught with danger.  You should take your advice from people who have business and legal backgrounds and can effectively advise you rather than online personalities who have never had to be responsible to a paying client for their bad advice.