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A HOUSE DIVIDED: The Family Home in a Divorce

27 Friday Sep 2013

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“When we divorced we split the house 50/50 – she got the inside and I got the outside.”

 “Have you seen the new “Divorcing Barbie” doll? She comes with Ken’s house.”

House Divided

             Joking aside, the family home is sometimes the greatest asset to divide in a divorce – so let’s look at how to handle this crucial asset.

It is advisable to call a Realtor early on, when you’re analyzing what assets you have and don’t have.  I often get called in to look at the home and give an assessment of its value in today’s market.  It makes sense to call a Realtor at this point – we typically are more familiar with the neighborhood and have been in the homes that are for sale and have sold, and are accustomed to pricing properties for sale.

There are online tools you can use as well – zillow.com, for instance, which gives you a “zestimate” of what your home is worth, or trulia.com.  However, these services have obviously not been inside your home or the other homes – so they are very general and cannot necessarily be relied upon.  Tax records are also notoriously unreliable.

A crucial consideration at this point may be whether or not the couple is “underwater”; that is, whether you owe more on the property than the property is worth.   If so, to sell the home you would have to bring money to the table.  In other words, in some instances it may not be possible to sell the home.

Also consider early on whether or not you want to fight to keep the home.  Can you afford the monthly carrying costs?  It might not be worth fighting for if it’s something you cannot keep up.

If one party does end up staying in and keeping the home, however, that party may be buying the other party out.  In that instance, professional appraisals are probably in order – each side getting their own appraisal and then perhaps a third appraisal if the two vary widely.  Know that appraisals are an ART as well as a science – while appraisers are bound by the Uniform Appraisal Guidelines and professional dictates, there is some subjectivity in the process.  When you hire an appraiser, you might wish to share with them the comparable sales that you think are most applicable and why they should be used.  Most appraisers are happy to consider the information, although of course they are not bound to use it.

But say the decision is that the home needs to be SOLD.  It’s great if you can both agree on a Realtor.  That actually happens much more often than you might think.  Maybe you both liked the Realtor who sold you the home.  Or know a Realtor jointly who you respect.  Another tactic is to interview three Realtors and see if there’s a clear front runner who you can agree upon.  If not, one way this is sometimes handled is that one party will choose the Realtor for a specified period of time and the other party will choose for the next period – be it 3 months or 6 months.

Several considerations arise here.  Keep in mind that there are various expenses involved in getting the home ready for sale and keeping it maintained while it is on the market.  How those expenses are handled should be decided upon in advance.  You might also want to decide in advance how much the list price will be decreased and when – and what offers should be acceptable (i.e., you can agree that any offer within five percent of list price must be accepted, that sort of thing).

Then there are some very practical showing considerations.  An example will illustrate this point.  We had one client where the wife left with all the nice furniture.  We were left showing a home with very little furniture and a “divorce feel.”  Try to agree to keep enough nice things in the home to make it show well.  Like it or not, buyers are swayed by these things.  Most buyers choose emotionally and THEN justify the purchase logically.  If they walk in and the home feels forlorn and empty, they will not feel great about the home – or may think the seller is in desperate circumstances and thus make a lower offer.  It pays off to have the home nice for showings.  If nothing else, the parties can agree to borrow or rent furniture or to have the home staged for showings.

The home must also be AVAILABLE for showings.  This becomes an issue when the person staying in the home doesn’t necessarily want the home to sell.  Perhaps the other party is paying the bills, and so once the home sells the occupying party loses that support AND must move to a lesser home.

When an offer comes in, keep in mind that your net is less the Broker’s commissions, the mortgage payoff(s) and any repairs that will be necessitated during the inspection period.  Your Realtor can help you figure your net from a given offer.  Again, it is sometimes helpful here to have agreed what amount and type of offer should be acceptable.

A note here if one party stays in the home.  Be aware of title issues.  When you sell the home, a title search is performed.  If there are any liens against the property, these must be paid off before closing.  Even if you do not sell the home, if you are the one keeping the home you want to have a title search before all is finalized.  That way you can be sure the departing spouse didn’t borrow money against the house or otherwise create liens that you will be responsible for when you sell the house and which effect its value.

The final issue – housing options once you leave the family home.  This is for you and your Realtor to decide, but just a few things to keep in mind: do you need to stay in the same school district for the kids?  Do you need to stay close to the other spouse for the children’s sake?  Even the priciest zip codes have affordable options that your Realtor can help you find.  And keep in mind that emotionally you may want to stay in a familiar area; the one you’ve lived in or an area with friends and family near.

A House Divided – Selling Your Home While Getting a Divorce

10 Wednesday Aug 2011

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It’s no secret that this real estate market is very difficult for sellers.   Home prices are lower than they’ve been since 1990, and prices are still falling.  Therefore, many homeowners are “holding on” – deciding not to sell in this strong buyer’s market.  Those who are selling generally fall into one of two categories: (1) those who have to sell (sellers who can no longer pay the mortgage or they are relocating a new city) or (2) those who want to move “up” and figure they’ll make up what they lose in selling their current home by getting a great deal on the move-up home.

And then there are divorcing couples.  Multiply the stress of divorce with the current economy and tough house-selling environment, and it adds up to a very difficult time.  Sometimes divorcing couples fall into category (1) – but oftentimes they don’t have to sell, but they want to sell in order to move on with their lives.  The house is often one of the largest, if not the largest, marital asset.  If one party decides to buy the other out, the party who is being bought out is getting short shrift – the current appraised value is certain to be low compared to what the home was worth before the 2008 housing crash – and also low compared to what the home WILL be worth when the housing market recovers.

In a relocation situation, Realtors often recommend that a seller consider renting out the home in lieu of selling, at least until the market improves.  Divorcing couples generally do not wish to explore that option, and of course it is often not in the divorcing couples’ best interest for the parties to continue to have to deal with one another in finding a tenant, maintaining the home, etc.    The divorcing party’s desire usually is to make a clean break and start a new life.  So, for divorcing couples who decide that they must sell together in order to fairly divide the marital housing asset, here are some thoughts and guidelines to make the process easier:

IF POSSIBLE, BOTH PARTIES SHOULD VACATE THE HOUSE.  Key to selling a home is making it as accessible as possible for agents and their buyers.  If your home cannot be shown, it won’t be sold.  If one or both parties are living there, it’s more difficult to show and since the two divorcing parties are often not speaking with one another, it makes it even harder to arrange showings.  It only makes sense that it is not a good idea for both parties to live in the house while it is being marketed and sold.  There is already enough stress in the relationship.

BEWARE THE “DIVORCE HOUSE” LOOK.  If only one member of the couple is living in the house, the home tends to look barren and sad with half the furniture gone. Agents can tell when it’s a divorce house, and buyers can too.  Since purchasing a home is often an emotional decision, a half-empty house is a big turnoff, even though much of the prejudice may be subliminal.  Buyers may not know WHY, they only know that the house feels sad, and they won’t want to buy it.  You are much better off selling a vacant house (totally vacant, cleaned, fresh paint) or one that has been staged nicely with furniture.   Another problem with one party remaining in the home is that it often causes disagreement between the divorcing parties as to whether the seller remaining in the home is “thwarting” the sale in any way.

IF ONE PARTY MUST STAY IN THE HOUSE, stage it.  It does not have to be “full” but it should look as if there has been time and effort put into making the house presentable for buyers.  In other words, no folding chairs and bridge tables in the dining room, and no blow up mattress serving as the bed.

CHOOSE A REAL ESTATE AGENT TOGETHER.  Both parties must trust and feel comfortable with the agent who is chosen.   Neither party should feel that the agent favors one seller over the other, communicates better with one seller over the other, or is otherwise prejudiced against one of the parties.  That said, we often represent couples when an agent on our team has been friends with one or both of them and it seems to work out fine as long as there is good communication between all three – the two sellers and the agent.  It often helps to have an agent who knows the parties, is empathetic, and fully understands the situation.  If there is any conflict or uneasy feelings during the course of the representation, be sure the let the agent know your feelings about this and give them a chance to rectify or adjust. 

COME UP WITH A PLAN OF COMMUNICATION.  We will often find that divorcing couples are not communicating well with each other.  This is not surprising, of course.  In that instance, having a plan whereby the agent communicates with both parties at once through email is often the key.  Otherwise, the agent has to choose “who to call first” and that can cause problems, UNLESS both sellers agree that the agent’s primary contact is with one particular seller.  If email is to be the primary source of communication, be sure that both sellers have ready, easy access to email and check it regularly.  Remember that DELAY – in responding to a request for a showing, or to an offer – can be deadly to a sale.  Buyers will move on quickly in this era of many, many homes on the market.

PRICE RIGHT FROM THE BEGINNING.  Divorce always takes an emotional toll, regardless of the circumstance, so you want to limit the damage as much as possible.  Better to get the house sold that to have it sit on the market forever while the parties wait – and wait – and wait – to fully move on with their lives.  Time and time again we find that the longer a house stays on the market, the less the seller ultimately gets for it, so this would seem to be a no-brainer.  Price right from the beginning!  In this strong buyer’s market, that is likely to be less than you thought or hoped you would get for it, but mitigate the damage by pricing well from the start.  Believe me, ultimately it’s better – and more lucrative – that way for all parties.

Our team has helped many divorcing couples through the process of selling a home, and we’re happy to help you as well.  Please do not hesitate to contact us at mwalser@kw.com or 404-272-3527.