Spotlight: Real Estate Resources
Introduction: Real Estate & Divorce
The family home. Next to child custody, the primary residence—which is typically the highest valued asset most couples own—is the top-contested aspect of a divorce settlement. This is understandable, considering it’s likely the site of so many memories.
Your children took their first steps across the living room floor. Your first pet transformed from a 12-pound pup to a 50-pound dog right before your eyes in the kitchen. The backyard was host to countless family gatherings and Fourth of July parties. The list of memories goes on and on, making your family home a sentimental asset sure to evoke protective emotions.
If you’re invested in your home, you’ll likely have questions such as:
- Who will get the home?
- Can you negotiate a buyout to secure the home for yourself?
- If no one desires to stay in it, or if a judge forces you out, how do you sell the home?
- And if you’re the one leaving and are seeking new living arrangements, you may be wondering: Can I purchase a new home while going through a separation, or is it too risky?
DivorceForce is here to answer all of these questions and help you through the confusing and difficult real estate process. Let’s start with the most common inquiry: Who gets the house?
If your divorce is amicable, the answer may be simple. For instance, a husband may forgo rights to the home to enable his wife to live there with the children. If the divorce is contentious, however, this can turn into an argument that doesn’t seem to have an end. In such instances, a mediator may attempt to persuade both parties to compromise, or a judge may need to get involved. If you enlist a judge to make the decision, he or she will defer to state laws governing property ownership and asset division during divorce.
Such property laws include:
Community Property Law
The community property law dictates couples split assets and debts acquired during the marriage in half, meaning all income, savings, investment, and property purchases will be divided 50/50, despite the amount each originally contributed.
Equitable Distribution Property Law
Most states have the equitable distribution property law, which doesn’t divide property 50/50. Multiple factors including income, inheritance, earning potential, length of marriage, and the date the property was acquired determine which spouse receives or concedes more.
After a judge has weighed each of these considerations, they will either allocate the home to a single spouse or allot shares to both parties.
This can be done two ways:
In this instance, a judge can require a buyout, grant possession to one spouse through a specific sell date, require the couple to sell the home, or offset the home value by awarding other assets to the other spouse.
In deferred distribution, the judge states the equity in the marital property can be distributed at a later date, such as when the youngest child turns 18.
Whether you and your spouse compromise or the court settles the matter, you’ll typically have three options to choose from: sell, co-own, or buyout your spouse. So, what is a buyout and how can you negotiate one? We’ll discuss that next.
During a buyout, one spouse must purchase the other’s financial interest in the property. To complete such a transaction, the couple must negotiate and mutually agree upon who will buy the other out and the price. Typically, the custodial spouse will buy out the home to provide stability for the children, however, they must have the financial means to do so.
You have three options to afford the buyout:
It’s unlikely one spouse will have enough cash on hand to cover the purchase price, however, it can be done.
Refinance the Mortgage
When refinancing, you’ll need to qualify for a loan by verifying your income and having a good credit score. If this is the route you’re interested in taking, ensure all of your financials are in order.
Trade Other Assets
Trading assets will involve the most negotiation. Discuss with your spouse which assets you’re willing to give up to buy out the home. This can be luxury cars, vacation homes, or other high-cost assets.
There’s one important question you may still be wondering: How do you determine the home’s value and the amount your spouse will receive?
Similar to a home sale where a divorce isn’t involved, the value of the home is determined by a professional appraiser. After inspecting the home, they provide an estimate of its fair market value based on condition and comparable homes in the area.
If negotiating a buyout isn’t in the cards or neither spouse wants to keep the home, it may be time to sell.
Selling your home during a divorce is an emotional process—we understand. Although you may not want to let go of your home, it’s best to prepare for the inevitable to ensure a smooth sale.
Here are eight best practices to keep in mind when selling your home:
- Protect Yourself
Safeguard your finances by completing your own investigation and research on the home sale. You may want to think about hiring your own professional inspector, as well.
- Compromise With Your Ex
Your home will sell faster if you compromise with your spouse. Ensure you discuss home sale price and an acceptable offer you both will agree to.
- Prep the Home
Make any necessary repairs or updates to get the best price possible. Determine which spouse will pay the mortgage and bills, who will live in the home, and which spouse will be present during showings while the home is for sale.
- Time the Sale Just Right
Put your home up for sale during a sellers’ market in the spring, before you go to court, and before tax exclusions run out, to get the best possible offer.
- Know the Tax Implications
Find out which tax implications may impact your home sale. The major issue most couples deal with is capital gains tax.
- Consider an Investor
An investor can take a home off your hands for a reduced price within a few days or weeks, instead of the months it may take to sell to a couple or family.
- Pay the Mortgage
Ensure you’re making mortgage payments throughout the sale process.
- Hire a Realtor Divorce Specialist
Professional real estate agents specializing in divorce will have the knowledge about marital status impact on the title and tax implications, and experience to sell your home while handling the situation with discretion.
For some, you’re ready to move on and start a new life—and that includes purchasing a new home. However, there are several risks that come with buying a home during a divorce. For instance, there’s the possibility your soon-to-be-ex will claim partial ownership. It’s also risky if you utilize money from a joint account to purchase a home. The final two liability considerations include negative impact on legal proceedings and affordability. Because of these uncertainties, many professionals will urge you to wait until your divorce is finalized.
If you still want to move forward despite the aforementioned risks, there are several precautions you should take. Have a calm discussion with your spouse to ensure they’re on board with the purchase, eliminating the risk of sabotage. Also ensure you’ve secured proper documentation and utilize funds separate from that of your combined assets. Sign up for a new bank account and credit card. Additional precautions include getting written clarification of single ownership, a legal property agreement, and court approval.
Because every real estate decision during a divorce is just that much harder, including purchasing a separate home, it’s critical to obtain professional advice from a realtor divorce specialist.
A realtor divorce specialist undergoes training and certifications to provide support and services specific to divorcing couples, ensuring you receive the most personalized advice possible. Such designations include Certified Divorce Real Estate Expert (CDRE), Real Estate Collaboration Specialist-Divorce (RCS-D), or Certified Real Estate Divorce Specialist (CREDS). Through these certification courses, this professional will learn necessary law information such as the impact of marital status on the title, tax issues such as dealing with bankruptcy, and emotional navigation.
Overall, realtor divorce specialists are better equipped with divorce-related knowledge than a general realtor. They have the ability to handle contentious situations and work with couples to compromise on financial-related issues such as price and acceptable offers. Such professionals also understand the divorce home sale requires discretion, as most buyers are less likely to purchase a home if they know the couple is divorcing.
A realtor divorce can assist you with all aforementioned real estate needs: selling a home, negotiating a buyout, purchasing a new home, and the general process of dealing with real estate while navigating the emotions of divorce.
With DivorceForce, finding a realtor divorce specialist is simple. Simply browse DivorceForcePRO, our resource full of divorce professionals including mortgage brokers and lenders, property appraisers, and commercial and residential real estate agents who specialize in divorce.