Wednesday, April 18, 2018 / by Robert Woessner
Home Options During Divorce
The decision to divorce comes when all other options fail for a couple. While divorce is an emotionally excruciating move in life, there are several other aspects associated with the separation that you need to look into.
What to do with the marital home is a giant question in front of divorcees. Since this is a really challenging and tricky decision, you need to consider every option.
A number of choices and implications will come up that are going to affect you and your former partner financially and emotionally.
Therefore, learning about the different consequences of each of move and choice possible should be your main goal, and should be why you choose to read this book. I’ll go through the options, scenarios and legal aspects that will come up.
Options for Your Divorced Home
Just like separating after a divorce, parting with the home you love is a rough time. Not that it can compare to breaking up with your spouse. Nothing can compare to that, but parting with your house is still tough.
An important question that you and your ex-spouse must address quickly is what to do with the house. If you are leaning toward selling, consider the advice of attorneys, financial counsellors, therapists and even real estate agents.
Don’t rush to sell and cost yourself money. Don’t settle with your spouse as soon as you can and cost yourself money. Think it through.
All those people are going to offer a few different points of view, so it’s worth talking about all those different factors and choices you will run into with them. Even though it may seem like there a few choices, there are only three realistically.
First, is to retain the house. Leaving the title and mortgage as they are. Someone would still have to move out, but if you have kids this could make sense, but not that much sense.
The next option is to transfer the title and mortgage to either you or your ex-partner. This would require a buyout of some type, in the majority of circumstances.
The last option is to sell the home together and move on to a new place. There are pros and cons to each of these decisions. You have to consider them each.
I can’t stress enough that rushed decisions could cost you big time. Start off by seeing if any of you would want to keep the home or can afford to not sell it. As said before, children and schools are going to be a big factor in your choices.
If none of you is comfortable staying in the house, selling is the only option on the table. If you have kids, child support may come into play.
So that makes maintaining two houses even tougher to imagine. Still, it is not uncommon to see families holding on to a house and paying separate mortgages.
Adding one more payment to your present one can certainly be an impossible task. Therefore, you must decide to make your transition structured and smooth as much as possible.
Though a positive attitude is important, you must always give your due regard to what is possible. That way you can safeguard your interests and financial safety in the long run.
Selling the House
Most industry experts agree that selling the home is the best viable solution for divorcing couples. This is the best option by far. It addresses and takes care of several complicated issues. It also will alleviate a lot of the friction, especially when it is over.
Once you have agreed to sell your home at the time of the divorce, there are a few things that should guide you through the process. In the first place, understand that when you are already undergoing a rough phase of your life, you should not take the additional burden of selling the home yourself. Well you could, but that’s going to lead to rushed and clouded choices.
Do some good research to find the right agent who can understand you, while helping sell the house fast and for a reasonable price.
You need to take the advice of the agent on the asking price of the house. Listen to the agent. In this situation starting off with the wrong price on your listing will set you back.
Staging the house can be a tough job while selling a home. You need to decide which minor repairs and improvements need to be done.
If you have already left the property, then you can entrust the responsibility of staging the home to the agent. Cleaning the home, removing the clutter and mess, clearing the extra furniture, making fine tunings are all some tough jobs. If one partner is doing all this, then the other might think of compensating them adequately for this effort.
Reviewing the offers received is the combined job of the divorcing partners. While both of you can benefit from the advice given by the agent, and should head it, ultimately you both have to decide on it with mutual participation.
With choosing to sell the house, you might again land on some crucial questions. Whether to do it before or after the divorce? Whether to tell the buyers about their divorce status or not?
Several lawyers and counselors will stress on the possibility of benefiting from capital gains if the property is sold before divorce.
However, it will all depend on the specific situation that you have in front of you all. Once the sale of the home is decided and there is an agreement on what happens with the sale and who is to pay for what, the best thing would be to leave one of the partners to deal with the process.
This will let the agents and the buyers feel comfortable to move in on a potential sale to a smooth conclusion.
The final and the most important thing in selling the house is to divide the profits. You need to pay off all the obligations of the house and also settle whatever other payments and commissions you have agreed upon.
The resulting amount needs to be divided between the separating couple. In this regard, if there are any post-separation mortgage payments to be made by one of the divorcees, then this must be given due consideration in dividing the proceeds.
Often some divorcing couples decide to co-own the house to let their children live there till they get older, and sell the house after that. There are some pros and cons of such decision.
Any failure to make mortgage payments can equally show up on the credit scores of both the partners. It is also necessary to decide the ways of allocating the mortgage, keeping up with the expenses and who would benefit from the mortgage interest deduction.
If one spouse can be allowed to benefit from that, the other partner can be compensated adequately through some other financial means.
Co-ownership will also force the unwanted burden of lingering involvement with one another. Sometimes when the transfers during divorce are not taxable, the co-ownership agreement prevents such benefits.
The arrangement of co-ownership must be included in the decree of divorce for, accompanied by a court order. While they continue as co-owners, it is also essential that they make contingency plans to cover their death.
If a partner wants to retain the property for himself or herself, the option of buying out the other partner’s equity comes into the picture.
In this situation, one of the worst decisions for one partner could be to transfer the title to the other while still being committed to pay the loans.
This is something that will create lingering stress and heartache.
Though this could be one of the options, there are certainly ways to disown the legal and financial ties to the transferring owner while giving the co-owner the sole right to the title.
This can happen through the right kind of refinancing arrangement where an entirely new loan is offered in replacement of the existing loan.
However, the fact remains that the co-owner must now be able to qualify for the loan.
Often in most cases, the other party wishing to keep the property might be baffled to see the actual figures of the loan that they must bear, once they own the property in full.
In some cases, the ex-spouse willing to keep the property might want to sell the equity in the house to other kinds of jointly owned assets.
Under such arrangements, a fixed amount needs to be assigned to all the assets put together. After this, the parties can mutually agree on an equitable division or appeal to the court to direct the proceedings.
However, in most cases, the divorcing partners will have only a few valuable assets to divide with the house being the major one. Therefore, how the house is settled is a crucial decision with implications for both the parties.
If the divorce goes to trial, the issue of home assumes the secondary importance. When there are no equities to divide and the divorcing partners defend their rights over the home strongly, the situation must be approached objectively.
Often the surprise is that the partners contend over the house, and it does not have any equity. In their ignorance, most people might not understand that it is not an asset but a liability if it is underwater.
Under such circumstances, the best option would be to liquidate the property and settle things as painlessly as possible. This means shifting to a short sale of the house.
Under some typical conditions for some homeowners, it would be a feasible to buy out the other spouse. This is advisable when there is substantial equity in the property.
Keeping it for Kids or Other Options
The modern age scenarios are changing drastically. An increasing number of couples are declining from divorcing the usual way. Instead, they resort to creative solutions because of their children.
After splitting, more people are now going in for a different kind of living arrangement. They wish to keep their children in a stable atmosphere, rather than pulling their roots from the home while they are growing up.
This could mean waiting till the children are a particular age and then selling the house. Some couples move in and share the house while ending their marriage, which is also called as nesting. This is a sort of amicable breakup.
These arrangements have less emotional influences on the children. Such conditions might also be forced if the couple is already upside down on their mortgage payments.
This could be a real tough decision considering the several pitfalls, and this cannot go on for an indefinite length of time.
Why Selling Works the Best
While most divorcing situations do not find the couple dealing very peacefully with each other, the major is getting their fair share of the property. That might be the biggest challenge to solve.
If the attorneys and mediators think it is unsuccessful to work with you, you will have to go through court proceedings and wait for an unknown amount of time to hear what might be unfavorable to both of you.
Therefore, the best idea is to liquidate the property and divide the proceeds between the two of you. It would help solve the issue more peacefully with less friction and dissension.
Though you might even have some court mandate directing a certain amount of payment, it is no guarantee that you will receive that money, especially in any sort of timely fashion.
Your opposing party might be unable to afford the payments at a point in time. Since circumstances can always change, and you need to be always realistic. Employed professionals are at the risk of being laid off. Self-employed people are at the risk of swings in income.
The intention to pay might also end after the children grow up. It is not always best to make long term plans solely depending on those payment arrangements.
Several reasons might justify or motivate you to keep the home. However, know that things have significantly changed these days.
While homes are a symbol of security, they could also turn into nuisance under some circumstances.
Defaulting the loan payment, needing to pay the insurance and property taxes, the escalating tax payments during the escalation of the property value and so on.
You also will need to set aside something for home maintenance. If the home is already aging, then it could be a real hassle. Things like the status of the plumbing, the wiring and the foundation could need work.
Other issues that you may have never thought of while living with the spouse could crop up now, what to do with the yard, how to maintain the pool and how to pay for the utilities of the home. While planning to keep the home, you must weigh each of these aspects and consider what they would cost.
Therefore, at times, a smaller and newer home can meet your real needs more effectively, while also freeing from the headaches and memories associated with the marital home.
The concept of condominiums is getting more popular among the different kinds of owners. In this system, the homeowners’ association takes care of the hassles associated with the maintenance issues, and a lot of expenses are shared among the association members.
During times of transition, such arrangements can offer a big relief.
When you are married and sell a home, you are going to benefit from the capital gains tax ramifications. Check out your local property tax guidelines to find out.
While selling their home, the couple can apply for this tax break together. If the equity has grown over the years, you can save on taxes. If one partner decides to stay postponing the sale for later, it would mean selling the home under a different tax scenario.
Deciding on this important issue will need to follow a deep introspection and an honest judgment.
The best thing about selling a home is to get money in your hand. That will create a new start and a clean break, hopefully overcoming all the negative memories, legal, social and financial implications of separation.
Often you will come to realize that rather than keeping your home, making a fresh start with a new arrangement is more important to avoid several complications, burdens and having some peace of mind.