DIVORCE AND REAL ESTATE: A CHALLENGING COMBINATION
Are you transitioning through a separation, a divorce, a life change?
When couples separate, before addressing the lengthy process of untangling the couple’s finances and agreeing on child custody, the first question that pops up is “Where am I (are we when there are children) going to live?” For most couples, there is a marital home involved and arriving at a fair solution requires balancing financial decisions and weighing emotional pros and cons.
Divorce is a highly charged emotional event and generally the beginning of a frightening, chaotic time. I have worked with many divorcing couples and have witnessed first hand how devastating it can be. Divorcing couples are going through one of the most stressful times in their lives. They’re scared and don’t know where to turn. Oftentimes, women are told they cannot afford to stay, they have to sell the house. But talking to the right professional may help them find ways to keep the home.
HELP IS ON THE WAY!
After seeing the struggles divorcing couples, and especially women, go through, I realized I could make a difference and make the process go more smoothly. Divorcing couples need to work with a real estate professional who not only empathizes with what they’re experiencing but who understands the tax and legal implications of dividing real estate in a divorce.
I have secured my Real Estate Divorce Specialist Certification ™ to further improve my familiarity with the issues surrounding divorce and the sale of your home, and how to identify the best options for both parties while working with your teams of advisers.
WHERE SHOULD YOU START?
Before talking about what to do with your family home or homes, my experience working with clients with significant assets has shown me that the best option is not to hire an attorney right away but rather to talk to an investment adviser experienced in divorce who can brainstorm with you and help you build a sound strategy going forward.
WHAT TO DO WITH YOUR FAMILY HOME AFTER THE DIVORCE?
When there is a family home, typically the largest marital asset, you have to decide whether to keep it or sell it. The home can become a key bone of contention. Sometimes the husband wants to sell, the wife wants to keep the house, or vice versa, and coming to an agreement can be very challenging, even in an amicable divorce. There are many financial, fiscal and emotional elements that come into play that will influence not only whether or not you sell the home but also but also the timing of the sale.
There are typically four options:
- One spouse keeps the house and buys the other spouse’s interest in the property. It can be quite complex to determine each party’s interest in the home. If the home was purchased during the marriage as joint property, each spouse has a fifty-fifty interest in it. If one spouse owned it before the marriage, he or she may own it 100 percent. However, if both have contributed to paying the mortgage and maintaining the property, the second spouse can have a partial interest in the property. Under such a scenario, while getting your name off the deed is easy, getting your name off the mortgage if you sell your interest to your spouse can be tricky. Leaving your name on the mortgage can make it harder, if not impossible, to get a loan for buying your own house. And if the spouse keeping the home doesn’t make all the payments, credit scores are hurt for both spouses.
- One spouse continues living in the house for a pre-determined period of time— generally until the youngest child graduates from high school–and then the house is sold. This allows the custodial parent to keep the child(ren) in the same school(s) and avoid further disruption.
- The house is sold immediately and the proceeds are divided between both spouses. Oftentimes couples are forced to sell. It is difficult for the party who wants to keep the house to cover not only the mortgage payments, but also the property taxes and ongoing maintenance.
- Because they cannot afford the cost of two homes, both spouses continue living in the home together for some time. This is more rare, but I have seen it happen.
There are tax consequences to consider, too. While a couple is married, they are exempt from paying capital gains taxes on the first $500,000 in appreciation. After divorce, however, that exemption drops to $250,000 unless they get the proper advice on how to handle the sale.
The first step should be to find out the value of the home and to determine how much one spouse needs to pay the other for a buyout. I would be happy to prepare a complimentary market analysis (CMA) to determine the value of your home in today’s market. I could also prepare an analysis of the costs of selling your home so that you would know how much you would net after paying off the mortgage and the fees associated with the sale, should you decide to sell.
I typically recommend that the spouse buying out his or her ex also hire a home inspector, termite company and, if needed, roofer and pool contractor, to conduct inspections prior to the divorce. That spouse also needs to make sure that title is clean and all the property taxes are current.
To best protect your interest, you will need the guidance of someone who specializes in divorce. As mentioned above, I have had experience working with many divorced sellers and buyers in the past, and I have obtained my Real Estate Divorce Specialist Certification TM to further improve my familiarity with the issues surrounding divorce and the sale of your home, and how to identify the best options for both parties while working with your mediator and/or attorneys.
SELECTING YOUR REALTOR
As with any real estate transaction, you will want to make sure you are hiring a top agent who has your best interest at heart and will sell your home for the highest possible price. Someone who is familiar with the Marin County Real Estate Market, and is tech and social media savvy in order to provide maximum exposure for your property.
Selling a home can be a stressful process under normal circumstances, but during a divorce it can be overwhelming as there are so many decisions to make. Maybe your spouse handled all the finances in your marriage and you are totally overwhelmed with having to make decisions about matters with which you are not familiar. Having a Realtor who has the skills and patience to explain everything to you is paramount. Since there are two parties involved who, more often than not, are not living together anymore, the agent is going to have to have a great amount of patience as all communications will more than likely be repeated multiple times.
You will also want to make sure that you are working with a real estate professional who is familiar with the issues surrounding divorce in a real estate transaction and the complexities of selling your home during that emotionally charged time. I have had experience working with many divorced sellers and buyers in the past, and I have secured my Real Estate Divorce Specialist Certification TM to further improve my familiarity with the issues surrounding divorce and the sale of your home, and how to identify the best options for both parties while working with your mediator and/or attorneys.
Everyone’s needs are different, but there is a common thread: to make the best decisions for you and your family you really need a team of experts in your corner. Divorce takes a team! Having a Realtor who has a team of trustworthy professionals to whom they can refer you is essential as well. I have a network of divorce professionals to whom I would be happy to refer you.
Selecting your Realtor is a process that should be preferably done with your spouse because if one spouse selects the Agent on his/her own, the other spouse may feel slighted in the process. The natural instinct is to feel that the Realtor is going to play favorites.
Ideally when I am interviewed to represent a couple in a divorce I ask them both to be present. I want them to feel confident that I represent both of them equally. The goal is always to get the best terms and conditions in the shortest amount of time with the least amount of headaches for both.
Getting a divorce is stressful enough as it is, so my top priority is to make the home sale process as smooth as possible.
If you are interested in reading informational and useful articles on how to deal with the many issues arising around divorce, please visit my Marin Divorce Real Estate Website, follow my Marin Divorce Real Estate Facebook Page, and visit my Divorce and Real Estate Pinterest Board. I also encourage you to check my Divorce Resource Page.
Feel free to contact me at 415-505-4789 for a confidential consultation.