No one enters a marriage thinking it will end in divorce. However, approximately 40% of all marriages in Canada lead to a divorce. Divorce brings many emotional, financial, legal and housing considerations.
Splitting assets during a divorce can be a complicated matter, and selling the family home is no exception. At this time, non-emotional, objective information that can help you make the right decision, when it comes to the “house.”
We have compiled this guide to provide you with exactly that kind of information. Use this information to assist you with making the best decision for you and any dependants.
It is important to interview and assemble the professionals who you will rely on during the divorce proceedings early as you may not have the energy or emotional bandwidth later on in the process if things become less than amicable. A divorce team often includes any combination of a financial advisor, mediator, divorce lawyer, real estate lawyer, and local Realtor® with experience in divorce-related home sales.
The second step is figuring out the value of your real estate by securing an appraisal from an accredited appraisor. We work with a number of reputable appraisors in the Windsor-Essex area and would be happy to recommend a few to you.
Many appraisers lean towards a more conservative valuation which will not necessarily match precisely how the market values your home. However, the information provided by the appraisor in this assessment is commonly relied on in the court system and will be extremely useful if matters surrounding a matrimonial home end up there.
If cash on hand is tight another option is a comparative market analysis (CMA) or written letter of opinion. This assessment would be completed by a local Realtor and relies on analysis of the market value and market conditions based on past sales. This option is looked upon much less favourably by the court system, however if the divorce is very amicable this route offers a budget friendly approach to determining an approximate value of your home.
Remember, no assessment provides a guarantee of what your home will sell for as this is only determined when an actual firm written offer is accepted and your home is sold.
When it comes to divorce and the house there are five options:
1. Sell the House and Split the Proceeds
2. Buy out your Spouse
3. Have your Spouse Buy you out
4. Retain your Ownership
5. Keep Home as an Investment Property
In this situation you will want to maximize what your home sells for. A Realtor® can assist you in this regard. He or she can give you a professional evaluation of your home in consideration of the local market and similar homes that have sold in your neighbourhood, and in consideration of the overall condition of your home. You will also understand what your net proceeds will be after selling price, expenses and divorce settlement. Your settlement may not be 50/50, but rather, will be determined by negotiation and legal requirements.
If you are planning to stay put you need to consider the financial obligations. Can you continue making the mortgage payments on one salary? Perhaps you can renegotiate the mortgage or look at finding additional sources of income.
When you decide to leave you have the opportunity of getting a fresh start over in new surroundings. In the process however, be sure to speak to a lawyer and your financial institution to arrange for the proper transfer of title. If both husband and wife are listed on the title, then you are both liable for the mortgage. With this liability it could be difficult to qualify for a new mortgage.
Some people choose to keep the ownership as it is while one party remains in the home. Often this is for a defined period of time revolving around milestones such as the youngest child graduting highschool. This works for the short term. However, for the long term, you will want to consider tax and estate issues.
The home is kept as an investment property managed by an impartial property manager; and the profits split at an agreed upon rate—or used to pay the mortgage off sooner rather than later. This solution can be beneficial if there is not much equity in the home yet.
We often see Sellers using their family line of credit to afford any up-front costs associated with the home sale, and then dividing these expenses out of the proceeds of the sale. Other times one spouse will pay these fees upfront and the other gets less equity back from the sale, or something of that nature. There are other scenarios with tighter budgets where it might be possible for the Realtor® to secure staging fees included in the Realtor® fee which is paid when the house closes.
There is an old real estate adage, “Location, Location, Location”, but we say when it comes to divorce and real estate, the most important thing to keep in mind is “Communication, Communication, Communication”. We believe it is important for the Realtor® to never pick sides and to ensure that any important meetings are held either in person or by phone with all parties involved in the transaction.
We pride ourselves on being available to you, providing informative answers to your questions, and in turn, ask you a lot of questions about your real estate needs. In some cases, we find a mediator can be helpful when parties are at odds over neccesary decisions that must be made in the selling process such as setting a list price, open house schedule, etc.
A high number of modern divorces are handled by mediation, with decisions from the mediator typically being communicated to the Realtor® directly by the Sellers, and not the lawyers. When necessary, a lawyer can communicate to the Realtor® any specific clauses necessary in the offer. We always encourage full and open communication between all parties.
In terms of paperwork, there are many parts to the offer that already are legal and binding necessities. For example, if both you and your spouse are actually on the title then the sale has to be done with the signature and acceptance of all parties on title. And if your spouse is not on title, but still married and this is a designated matrimonial home, there is a space where the non-owner spouse must sign off on the sale.
Generally speaking, we encourage our Clients to keep their divorce personal and confidential, but it also depends on how close you are with your neighbours. For the most part, it’s not necessary to broadcast the situation and it’s often better to be vague and imply other legitimate reasons applicable to your scenario such as: downsizing, looking at all your options or taking advantage of the market.
Motivation is a key part of selling any property and if the prospective Buyers get wind of the reason your home is on the market it can potentially be harmful to you in negotiations. Some Buyers believe that a house where people are splitting up has bad karma, which can also create a negative impact on sale price.
Advice for those facing questions around what their motivation for selling is to talk about how much you have loved the property and stick with the truth without elaborating too much.
There are a number of budget-friendly living options that can allow you and your spouse to separate while you figure out more permanent arrangements. Some people opt to stay with family, whereas others rent a longer-term AirBnB or sign a short-term lease for furnished apartment. If things are on the more amicable side, some people will stay in separate rooms in the same house, or move into the basement or another slightly separated space. Through-out this it is important to remember that the house for sale must stay as clean and showing ready as possible in order to achieve the best possible offer price.
It is important to assemble your professional team early in the process and lean on them to answer legal, financial and real estate specific questions. Having open communication either directly with your spouse or through a mediator is critical to selecting a course of action that will be in the best interests for you both and any dependants you may have. Your Realtor® will be an integral part in ensuring your home is ready for the market and will help alleviate much of the stress that selling your home can bring.
We understand how important Client confidentiality and discretion are to you and would be happy to answer any questions you may have about selling your home during a separation. We can be reached by calling 226-347-2909 or through our website.
*Things Our Lawyers Require us to Say - Armstrong - Bentley & Associates is not a financial, tax, legal, insurance, or investment advisor, and this article is meant for informational purposes only.