One of the many tough decisions that a divorcing couple face is what to do about the family house. Many, if not most, couples sell it and divide the profits, but the decision is difficult because the family house was the family home until the divorce.
When a divorcing couple reaches the part of their breakup where the family house is on the table, each should always say and think house, not home. The family house is often the largest single asset a couple shares and is almost always owned by each jointly as tenants by the entirety, which means that each has an undivided 100 percent interest in the property. The family house is so many boards, and nails, and pipes on a piece of land. The family home, however, is a state of mind and habit of the heart, and, in a divorce, is the locus of melancholic memories of happier times gone now forever.
Memories, good and bad, can make the sale of a house in a divorce much more difficult. However, selling the house can be the default when neither spouse wants it or neither can afford to buy out the other. Selling the house is not quite as simple as buying it. At some point, the couple agrees on an asking price and puts the property on the market and hopes to get the best price, but before that point, decisions must be made jointly by two people who are in the midst of one of life’s most stressful experiences.
Divorcing couples with children often negotiate a regime whereby the custodial parent stays in the house so that the children are less disrupted in school because uprooting children to a new school when the kids are already adjusting to a lot of change can make a bad situation worse.
Selling the house may be a good course for couples without children because it makes for a clean break and both spouses may get money to start again.
Selling a house as part of a divorce can take as long as a year, and the seller(s) may incur capital gains tax that might apply as well as other expenses. These expenses are one disadvantage of selling, especially if market conditions aren’t good for seller.
Once the divorcing parties decide to sell, however, they are faced with a lengthy and detailed process that involves a number of projects, such as arranging for an appraisal, completion of lengthy disclosure paperwork and in some cases selecting an agent. These steps take hard work in the best of times, and the emotional upheaval that comes with divorce does not make them any easier.
Most couples want to use an agent to negotiate the sale because trying to sell a house without one – particularly when the couple are ending a marriage – makes for added stress. The agent arranges the showings of the house and can take care of the details that come up from the time the for-sale sign goes in the front lawn until the moment the couple turn over the symbolic front door keys to the new owner.
Normally, the agent brings his or her expertise into the process by recommending an asking price. Accepting the agent’s advice about the asking price is one of reasons for using an agent, and turning that decision over to the agent eliminates one potential conflict.
The agent often makes recommendations about preparing the house to show, which can be the most difficult part of the sale. Preparing to show the house means getting it ready. Often some work that needs to be done—for example, painting — must be done before the house can be shown. The couple must agree where the money to do this comes from. If both spouses have moved out by the time the house is on the market, the agent stages an open house. If one still resides there, he or she needs to get things cleaned up, remove the clutter, and probably remove some of the furniture. When preparation falls on one spouse, the couples sometime negotiate compensation.
The couple must come together again when it comes time to assess offers from potential buyers. Once again, the agent can offer advice, but the divorcing partners must make the decision.
Finally, as part of the settlement, the spouses negotiate the division of the proceeds. An escrow company or a lawyer can distribute the money, after paying off all the obligations on the house and making other negotiated payments. Before the sales proceeds are divided and distributed, the couple must pay off the mortgage, any equity line or second mortgage, and the brokers’ fees.
Even though both spouses own the house, adjustments must be made when one spouse pays the mortgage from the date of separation to the date of sale. The distribution should be adjusted to account for the paying spouse’s contribution. If the husband makes these mortgage payments, he reduces the principle and increases the couple’s equity, which increases the amount to be divided between the spouses after the closing costs and obligations have been paid. He can justifiably argue that he should recover increases in equity that earned as the result of the payments during the separation.