For many of our clients, the most valuable marital asset is the marital residence. When dividing all of the parties’ assets and debts, how do we deal with the marital residence? Obviously, we cannot physically divide the house in half. Here are the top five concerns that clients have when it comes to their homes.
1. Do we have to sell the house before we are divorced?
No!!!We have found that this is one of the most common misconceptions. You absolutely do not have to sell the house prior to the entry of the final decree of divorce.
However, you should have a very detailed real estate agreement, outlining all aspects of the sale, i.e. the listing agent, the listing price, which spouse is in charge of the sale and for how long, what decisions the “in-charge spouse” is permitted to make, by how much and when the listing price should be reduced, which offers are required to be accepted, etc. The agreement also should make sure to address how and by whom repairs and maintenance will be paid. That real estate agreement is a binding contract between you and your former spouse; but, it should not be filed with the court to prevent interested buyers from taking advantage of a perceived “fire sale”.
You also should be sure to select a real estate agent with whom you both feel comfortable, or ensure that the listing agreement is not for more than 90 days and you have the ability to change agents. Finally, you should inform your real estate agent of the pending divorce.
2. Assuming personal property has already been divided, how should we stage the house during the sale?
As Mary Anne Walser once said, “you do not want your house to look like a ‘sad house’.” During the pendency of the sale, it is best if you can keep the house furnished, even if one spouse is no longer living in the house. Understandably, that may not always be possible, so if you have to remove some furniture, ask your real estate agent to bring inexpensive pieces to stage the house. Finally, you should declutter your house as much as possible, and remove any personal photographs.
3. If I move out of the house, am I abandoning my interest?
No!!! This is one of the other most common misconceptions. If the house was purchased during the marriage, or if marital money was used to pay the principal of the mortgage, then the marriage has an interest in the house, regardless of who is living in the house, and the marital interest must be split up between the spouses.. Assuming there are no other issues at play (i.e. custody concerns), you do not have to wait until the divorce is final to move out of the house.
4. If we do not sell the house, how do we know it’s true value?
If you choose to agree upon a value for the marital residence and one spouse intends to buy out the other spouse’s equitable share, you have to first determine the house’s value. The best way to determine that is to sell the house, as true fair market value is what a willing buyer will pay a willing seller. The other options include gathering real estate market assessments and/or appraisals. Regardless of the method used, you may need to receive more than one assessment and/or appraisal, unless you and your former spouse are able to agree, in advance, on a real estate agent to perform the assessment or an appraiser. Generally, the real estate assessments are free and the appraisals cost a few hundred dollars. Real estate websites such as Zillow usually do not provide accurate values.
5. What else should I know about selling a house during or after a divorce?
You want to ensure that the house is free to be shown at any time. Do not let the emotions of the divorce hinder your decision-making ability. In other words, don’t prevent the house from being shown to get back at your former spouse. It is best for both parties that you financially disentangle yourselves as quickly as possible. It is also imperative that your house be clean and marketable. Do not hesitate to ask your real estate agent for tips and advice on how to best accomplish that.
The author would like to thank the following real estate agents for their contributions to this article: