Over the years I've been involved in hundreds of sales where parents were helping their kids buy a property, and I've seen that "help" come in many different forms. There are some good ways for parents to help their kids by a home, and some things that should definitely be avoided. So, here are my tips for the best ways for parents to help their kids buy a property:
- Don’t make assumptions based on previous experience. The most dangerous thing I see parents do is to make decisions for their kids, based on what worked for them. Real estate has changed considerably over the years and so have the trends. Basing an important decision on outdated information could be a major misstep. When I bought my first property, my dad told me not to buy a condo; at the time condos were much less common than they are today. I couldn’t afford a single family home so I bought a condo that turned out to be an excellent starting point (and that my parents eventually bought from me)!
- Don’t short-cut the process. Make sure the kids are involved and learn the process and what’s involved now, for their future benefit. Our process is to sit down with our first-time clients and explain the entire process of buying a home including contracts, costs, and what to expect for the type of property they are buying. I call this the 'no friggin surprises' method. We also review some of the important information I could provide to help their decision-making process. For example, I wouldn't buy a property without reviewing these documents:
- Titles and instruments related to the title
- A History of the property on MLS®
- Comparable sales and much more depending on the type of property.
- Attend the showings where possible, but know your limitations. Many parents will send their kids out to look at properties then show up after the offer is written. Most often this is too late. Nothing is more frustrating than the “it's not good enough mom” who decides at the inspection that there must be something better out there. When young people have done their due diligence - they know what’s for sale in the areas they are choosing, they know what has sold and have had thorough discussions about it and the information around it - and papa shows up knowing more than everybody, having seen none of the other properties... it's frustrating for everyone involved.If parents don't see at least some of the properties available in the price range you can afford, even the best option can seem like a dump. Parents don't need to see everything, but they should at least get a feel for what is out there.
- Protecting your children doesn’t mean keeping them locked in the castle. I remember one property in Westmount I showed to a smart, young, paralegal who had been looking with me for quite awhile. It was by far the best property for the price, condition and area she was considering. As we walked through the property it was obvious her parents hated it (they lived in the 'burbs). By the time the showing was done, she was in tears and there was no point explaining that we had looked at everything close to downtown and it was the best available listing. The next day I got a call from my client who was quite distraught saying she wanted to put in an offer, but her father had told her to go in significantly lower than list price. This young confident women was now a wreck, and the property was already pending anyway - two other parties wrote offers the night before and it eventually sold over list price.
- Estate planning is imperative. Will you be on the title with your children? What implications does this hold if you should pass away? What if they are married? Should you be joint tenants with them or tenants in common. In joint tenancy the survivors automatically get your share, but what if its tenants in common? Is your intent to gift the property to your children should you die or grant an interest to someone else? What if they are married or get married? Is this a gift to them? What if they get divorced? What if your current spouse gets remarried? These are just a few of the questions I ask in these situations. Often no thought has been given to this whatsoever when a good deal of thought must go into this. A discussion with your lawyer before your write an offer is highly recommended.