Are you faced with selling a house during your divorce?
With nearly 50% of marriages ending in divorce, many people may find themselves searching for advice about selling a house before, after, or during a divorce.
Houses can be valuable assets, often the most valuable item owned during a marriage. And unlike a bank accountant, the family home can’t simply be divided in half and split up.
Since divorce is already a stressful and emotional event, it can be a headache to add in dealing with property at this time. It’s important to know as much as you can so that you can go into the situation feeling empowered and informed, no matter the situation.
Some worries that many homeowners have during a divorce are what happens to the house, if their soon-to-be ex-spouse can refuse or demand to sell, and how can you divide up the value of the property fairly. They might also be asking themselves questions such as who gets the house when you get divorced, and who decides?
Of course, the legal specifics of real estate and divorce will vary depending on the state you are in. While it is always important to talk to experts for legal advice about your personal situation, including an attorney or court advocate, here is some general information about property and divorce that may help you understand your situation better.
Who Gets The House In Divorce?
A major question running through your mind during your divorce is probably “Who keeps the house?”
This is perhaps the most pressing question to anyone going through a divorce. Moving interrupts jobs, income, schools, neighborhoods, and personal relationships.
Before you can decide who gets the house in a divorce, there are a couple of basic questions you need to answer. The first of these is who owns it. In most cases, both spouses will be able to claim a piece of ownership. But that’s not always the case. You will need to know if you live in a “community property state” or an “equitable distribution state.” Most states are equitable distribution states, but you can check out your own state here.
In an equitable distribution state, the property is not automatically divided equally, it is instead divided in a way that is fair, or equitable. Essentially, the court weighs each spouse’s contribution to the marriage and what each will need to move forward after the divorce.
There are many factors that go into how marital property will be divided up, which can include:
- the length of the marriage
- Reasons the marriage ended, possibly including fault, meaning if one party is found to have contributed significantly to the breakdown of the relationship
- Contributions each spouse made to the purchase and maintenance of the property
- The income, occupation, assets, and liabilities of each spouse
- And more
Divorcing couples are able to divide marital property up amongst themselves, coming to an agreement alone, through mediation, or with attorneys. If they can come up with an agreement, they can present this to the court through an uncontested divorce hearing. If a divorcing couple cannot come to an agreement, then the courts will end up having to decide for them.
One key element of dealing with your real property during a divorce is the valuation. Unlike a bank account, it is not so simple as just taking the amount available on a specific day and divvying it up. Because the market changes, the value of your home can vary as well.
When determining the value of the property, you will need to figure out the fair market value of your home in the current real estate market. According to SmartAsset.com, “Fair market value is the price a business, property or other asset would sell for in an open and competitive market where the buyer and seller have adequate information of relevant facts, a reasonable time to complete a deal, are under no compulsion, are acting in their own interests and mutually agree on the price.” There are three main ways that the value of your home can be set during your divorce: an appraisal, through an agent, or city records.
When coming to a valuation with an appraisal, one (or less frequently both) parties will hire a professional appraiser to come up with the value of the home. This is the most comprehensive and formal valuation of the home. An appraiser visits the property and conducts a thorough, room-by-room inspection of the property. They take note of condition, repairs needed, upgrades and updates completed, and compare the home to other properties in your immediate area that have come up for sale recently. This allows them to set a fair market value for your home. Appraisers often have to have licenses or meet education requirements to ensure they have the proper training to give you an accurate appraisal. The average cost of a home appraisal is between 300 and 400 dollars. Though this option for valuation will carry the greatest cost, it is widely considered the most accurate way to discover the true value of your home.
Real Estate Agent or Broker
Another way to complete a valuation of your real property is to work with a real estate agent or broker. From them, you can obtain a Broker’s Price Opinion (BPO) or Comparative Market Analysis (CMA) of your home. With a BPO, a real estate broker takes into account factors such as age, neighborhood, condition, zoning, and size of the property to come up with a value of the home. They tend to be less in-depth than an appraisal, and are usually completed more quickly as well. They run around half the cost of an appraisal. A CMA is even less in depth, not requiring an inspection of the home, but rather comparing the home to other recently sold homes in the area with similar square footage and features (known as comps) to come up with a value.
A third way to determine the value of a property is to use the town records. Cities and towns use a property tax assessment to determine the value of your home for the sake of taxes. This is not usually considered a very accurate way to value your home in the case of a divorce, since city assessments are not updated very frequently and aren’t always a good indicator of the fair market value in your current market.
What To Do With Your House
After understanding the value of the family home, it is important to make a decision on how to move forward with the property. There are two basic options:
- One spouse can keep it
- The spouses can sell it
If One Spouse Keeps the House
If it is decided that one spouse will be keeping the family home, the property needs to be moved into that spouse’s name. If the home is owned jointly, the spouse who is not keeping the home will need to transfer their interest in the home to the other spouse’s name. This is frequently done with a quit-claim deed.
Dealing with the Mortgage
If the home is being kept by one spouse, there is still the issue of the mortgage to deal with unless the home is already owned outright. One option is that the spouse keeping the house can be an indemnity clause in the divorce decree. This clause would make the spouse who doesn’t retain the home not be held responsible for the payments. This can offer the non-owner spouse some protection if the spouse fails to pay the mortgage. Another option would be to refinance the home into a mortgage that is solely in the name of the spouse retaining the home. This may also allow for some of the equity of the home to be turned into cash.
Selling the Family Home
Some divorces will lead to selling the family home. The court order should explain the details, including the timeline, who will pay for repairs/upgrades, listing price, and division of proceeds. Sometimes one spouse may have the right to live in the house for a set period of time before the house is placed on the market. For example, this might be so that children can complete the school year.
If it is decided that the spouses will sell the family home, there are some options to consider.
Options When Selling a House During Divorce
One spouse can keep the house by “buying out” the other spouse with cash.
A “buy out” occurs when one spouse pays half of the market value to the other to gain sole ownership. The spouse who paid may now live freely without interference at the property. Buy outs makes sense if family members want or need to continue living in the neighborhood. Do the children go to school nearby? Does a spouse have a job requiring a house in this location? Buy outs offer a clean break without requiring the family to completely up-root their lives. The downside, of course, is that the person buying out the other party does need to have sufficient financial resources to pay to buy out the other person.
Selling the house following divorce is the more straightforward sale option. Once the house is sold, the sale proceeds can be easily divided as the spouses see fit and in accordance to the divorce agreements. The money can be used to find new housing, pay attorney fees, pay debts, and otherwise move with forward their lives. The disadvantage to a sale is that everyone will face some interruption in their living arrangements since everyone moves away from the property.
If your house needs some work before selling, consider selling “as-is”. The advantage here is to save the frustration of renovations, the money spend on the repairs, and close at a faster date.
Other Things To Keep In Mind
When do you plan to sell the house?
Setting a timeline for the sale process can make the transition smooth. Each spouse can plan living arrangements and their financial circumstances with an approximation as to when they will receive the sales proceeds.
For example, agreements are made where one spouse uses the house for a set period of time (this is usually used when there are children in the home), and then sold at a certain date (usually when the children reach a certain age).
You should put your home for sale in advance. Set firm closing dates, moving dates and times, and coordinate which spouse will be handling the sale (or talking to the real estate agent). Make sure that each of these agreements are in writing, and negotiate penalties for breaching the agreements.
Make sure both spouses are in agreement with the sale time frame to avoid potential conflicts in the future. This helps ensure a smooth, surprise free home sale.
It’s Okay To Ask For Help
Selling a home is a difficult process even when everything eles in your life is going smoothly. During a divorce, you have a lot going on and a lot to consider. Taking on the process of selling your home all by yourself may be too much. It is okay to get help. By working with a real estate professional… either a reputable agent or real estate investment firm, you’ll both have a neutral third party who can help you determine a fair selling price and handle the marketing of your home.
Thinking of an Investor Offer
One option for divorcing couples that want to resolve the housing issues ASAP is getting an all-cash offer.
Cash offers have multiple advantages:
- No banks are needed to approve the sale. Bank approvals can take 60+ days and then decline the mortgage at the last minute.
- No “appraisal contingencies” – an appraiser can’t decide the house is worth less.
- Banks only issue mortgages on property in good condition. If the house has some problems, cash buyers may be the only way.
- Direct cash offers save you on-going holding costs that are incurred while leaving a home on the open market for months.
By simply jointly deciding to sell and selling fast to a real estate investment firm like Bristol Home Buyers, and moving the process as quickly and according to an agreed upon schedule, all parties can walk away from the sale without stress and complete their divorce process with one less headache.
If you are looking into selling your home during a divorce and think selling to an investor for an all-cash offer may be right for you, please fill out the form below or give us a call. The Bristol Home Buyers’ team has years of experience helping people in the same situation and are waiting to hear from you!