REAL ESTATE GUIDE FOR DIVORCING COUPLES
Jeff Marples / Broker / 415.336.9695
HOW I REPRESENT DIVORCING COUPLES
Divorce is often-times filled with emotion and stress, is typically complicated and calls for a certain “bed-side-manor”. As a broker, it is imperative that I support both parties equally, as I have a fiduciary to both owners of the property, not just one. As a fiduciary to the owners, I can never take sides with either party and need to give advice equally. As a broker, there are limits to what advice I can give, thus I always suggest others to help mediate difficult situations outside of my expertise.
Bottom line the fiduciary responsibility with both sellers remains the same. As a broker / Realtor, I’m always cognizant and careful about how I handle my fiduciary responsibilities in these challenging situations.
Setting the stage when working with me as your broker:
- I give the same advice to both parties. When you’re representing both individuals as sellers, I give both the same advice to meet the fiduciary duty.
- Stay out of arguments. I cannot take sides in any disagreements. If there are issues, then the lawyers / mediators are to handle the conflict.
- Document all communication. It is important to send all conversations and guidance to both parties, includes standard information you share with clients and responses to questions. I try to always summarize all conversations with one party in an email for both parties to review, and to hold as a record of communications for the escrow file.
- Advice: I always make sure that advice given is to both sides and that the advice benefits both people equally.
Keeping a level head leads to better outcomes
“In criminal law you represent the worst people who are at their best, and a in divorce, you represent the best people who are at their worst”. Divorce can be a scary and emotional time of upheaval and change, for clients and their children — with many unknowns. Making decisions over the marital home adds complexity to an already stressful process. This is why you need a trusted team of advisors to help you get through the tough times, so you can move forward to better times.
HOW IS THE HOME CALCULATED IN A DIVORCE?
First and foremost, you need to know how the divorce home is valued, and how the equity in the home will be split.
Community property In California
California is a community property state and your home, classified as community property, if acquired during the marriage, the proceeds from the sale are typically split strictly and equally 50-50. If one spouse bought the home before the marriage, however, that is considered separate property and the rules for splitting the equity can become more complicated.
SHOULD I KEEP OR SELL THE HOME IN A DIVORCE?
The question to keep or sell a marital home in a divorce comes down to what you and your spouse can decide together. This can be for some very challenging if emotions are high and if it’s difficult to mutually agree on the outcome of the home. Sometimes one of the spouses want to retain control of the home and continue to reside in the property. In some difficult situations it may be up to a judge to determine a particular outcome if the couple cannot come to an agreement through mediation.
To get clarity on the situation, its best to consult with both spouses and identify the goals that are mutually agreed to and those that are not agreed to.
When sell the home becomes clear:
- You can’t afford mortgage, tax, upkeep and other payments on your own
- You can’t refinance to pull enough cash out to pay your spouse out
- It’s too emotionally painful to live there after the divorce
You may want to keep the home if:
- You have children and want to minimize the impact of the divorce on them
- You want to keep kids in the same school or school district
- You have strong emotional ties and memories associated with the home
Some sage advice is to consult with an attorney or mediator and make the decision whether to sell the home before reaching out to a real estate agent.
Sellers need to cooperate to achieve their desired goals, so both parties need to work together to move forward. You cannot have one of the parties sabotage the process, in those situations the resolution can be court ordered.
SHOULD I BUY OUT MY SPOUSE’S SHARE OF THE HOME?
Keeping the property and buying out your spouse’s share of the home to assume full ownership could make sense for several reasons:
- You want to maintain the stability for you children and not want to disrupt their lives.
- Location is ideal of work, schools, lifestyle.
- The market conditions aren’t ideal to sell the property
- You don’t have much equity built up in the home
- You have enough other assets to offset the other person’s equity in the home
If you wish to keep the home, the big question really is if you can afford the payments.
In most cases but not all, couples have qualified for their mortgage amount together, not as separate individuals. If that is the case you first need to determine whether you can afford to qualify for a mortgage independently. The question comes to after the settlement between the couple, the amount of equity that will be maintained by the individual who would like to retain the home.
Remember, buyouts of another spouse typically involves pulling out a big chunk of equity, the payment will be significantly higher. Get your estimated numbers in order to see if this is even a possibility.
Please note, there are a lot of potential pitfalls to this situation. If you decide as a couple to keep the home, then there could be issues down the road with sparing divorced couples and resentment towards one another especially when it comes deferring refinancing. Couples need to realize that in order to remove someone from the home, it will require refinancing through a lender.
If one party is planning to keep the home, make sure you get solid legal advice to determine the best course of action for your individual circumstances.
WILL MY DIVORCE SETTLE OR GO TO TRIAL?
Approximately 90% of divorce cases settle prior to trial. Most likely one spouse offers a settlement that the other accepts or at mediation.
If the couple can agree on how to divide assets, then negotiating a settlement agreement between the two parties couple be possible without the assistance of an attorney. This is known as an uncontested divorce and could save you time and money, but also expedite a new beginning for individuals much sooner.
Some lawyers however might not agree that this is your best option, so learn your options and speak to an attorney. Financial settlements need to be fully transparent with all parties understanding the assets and liabilities held. It can be a situation where one person tried to hid assets. To avoid a conflict of interest, attorneys can only legally represent one spouse in a divorce case, the benefit of both parties cooperating and coming to an agreement is huge. Saving the emotional toll on both parties. However, if one party is being represented by an attorney, then both parties should equally have representation.
WHAT HAPPENS TO THE MORTGAGE AFTER I DIVORCE?
In the wake of a divorce, one of two things typically happens to the mortgage on joint property: you sell the home and each spouse collects their share of the net proceeds or one spouse takes full ownership of the home by refinancing the mortgage under their name.
Of course, the spouse assuming ownership will need the necessary income and credit score to qualify for the new loan.
The process gets more complicated if a divorcing couple owe more on the home than it’s currently worth, or if they’re facing financial hardship.
WHAT IF ONE PARTY REFUSES TO SELL THE HOME?
If the other party cannot afford to buy you out and is holding the property hostage and won’t cooperate with the sale, then you’ll need to work with a divorce attorney and file a motion with family law judge to compel the sale of the property
When you’re at odds with your spouse during a home sale, it’s crucial to get an experienced real estate agent involved to manage the transaction and handle all communications.
Be sure to work with an agent who is not a friend, best to use an agent who is neutral to the situation, someone who communicated equally and offers advice to both parties equally. It is essential to have that agent be neutral and to not take sides.
HOW I PROTECT MY CLIENT’S HOME SALE FROM THE MESSINESS OF DIVORCE
Take the emotions and personal disagreements out of the equation and treat this as a business transaction. Focus your energy on what is the mutual best interest, which is often-times a successful and profitable home sale.
I recommend couples try to amicably work together and shelve the disagreements as they can cost you financially with additional costs of attorneys and time.
Follow the advice of the real estate broker such as myself, preparing the home for sale like any other property, decluttering or if possible removing all items (especially personal belongings), partial or full staging depending on the situation, and especially listing price. To get the top dollar possible the home needs to look and feel fresh in the eyes of a buyer.
Most often finances are strained at this point so work with what you have to make the property look it’s best with the resources are available. I always tell clients and agents, we do the best we can with that we have to work with.
LIVING IN THE HOME WHILE IT’S ON THE MARKET
The decision to have one or both parties stay in the property comes to financial resources and what both parties mutually can afford. In my experience homes sell faster and for more money if the property has been vacated and staged. However that might not be possible, if that is the case I recommend removing all personal items from the property including family photos, children’s personal items, etc. Ideally, I want to have excellent marketing photos to promote the property. I also find that buyers need help to visualize how they will live in a home, where the furniture goes and have them get to experience what it would be like in the home. Never sell a home empty.
In addition, it can be financially challenging for divorcing couples to make three housing payments every month, so having one person remain in the home keeps the monthly housing expenses in check.
The person who stays in the home should keep it in clean and ready to show at a moment’s notice. I try to accommodate buyers as much as possible on their schedule, as well as a pre-determined showing schedule with the occupant for open houses, broker opens and a few times that work within the week to allow access to the home.
KEEPING THE DIVORCE PRIVATE WHILE THE HOME IS ON THE MARKET
Once a For Sale sign goes up in front of the home then the entire neighborhood will know about it, your neighbors may start asking questions and their goes your privacy. So sometimes we do not place the sign on the property to begin with.
One very good way to market a property without those nosy neighbors finding out is placing the home on the MLS under a section called “Coming Soon”. This feature allows me to promote the property to other real estate agents and their buyers, but does not syndicate the listing to the online portals, thus it does not reach Zillow, Trulia and other website. True it limits exposure of the property but still gives a direct path to active buyers in the community.
Another marketing tool is for weekly E-Blasts that go to the real estate community. We have a very larger database of agents in different parts of the Bay Area. So if there is a home in a certain area we can simply e-Blast the agents to gain tractions. We do this weekly to continue the exposure of the property.
The old fashions way is to make phone calls to top agents that work in the area, or have recently solds within the community or neighborhood. This can be very effective as once you get engagement with an agent you push for a showing if they have a viable and active buyer.
Last, your personal affairs do not need to be the business of any other person. Buyers always ask why sellers are selling. Frankly it is none of their business and they do not need to be informed. So it is the agents job to deflect that question and answer the appropriate reply. It also can affect negotiation, so simply not giving a direct answer is best.
RULE OF THUMB: NEVER DISCLOSE THE DIVORCE TO POTENTIAL HOME BUYERS
Sellers do not have any legal obligation to disclose the divorce to buyers, you have an obligation to disclosure material items that effect the property but divorce is a personal matter and can left undisclosed.
I think in these situations sellers need to trust and have confidence in their agent to keep these situations personal and discreet, protecting the seller’s confidentiality.
WHEN A SPOUSE OWNED THE HOME BEFORE THE MARRIAGE
Property acquired before the marriage is typically considered separate property and may belong wholly to the spouse who brought it into the marriage.
Separate property can become marital property if some circumstances, such as:
- The name of the other spouse was added to the deed
- The other spouse has been involved with the property, such as making mortgage payments,
- The property has appreciated in value due to the other spouse’s marital efforts, financial contributions for improvements.
If there is a question regarding who is eligible for proceeds for the sale, it is advised to seek expertise of a skilled attorney.
OWNING MULTIPLE PROPERTIES TOGETHER
Owning multiple properties isn’t that different from owning a single property, you just have more assets to work through and divide up. But you just do it multiple times.
There is however more options available, as you most likely have greater equity covering the portfolio of properties. It may be possible to keep the homes, or some of them, if you can find a way to package them that they offset the value for each individual.
If you decide to sell some of or all of the properties, the distributions of funds of each sale may get complicated based on the time of the sales and potential tax implications. Using a trust account might alleviate much of the headache as the trust sells all the properties and then disburses the funds at the end of the final sale.
It does get complicated and a good attorney may suggest you divide the homes into two LLC’s and move forward from there.
INCLUDE CHILDREN IN THE CONVERSATION ABOUT THE HOME
Couples should consider their children’s emotions regarding the home and make decisions depending on factors such as age of the children, schools they maybe enrolled in and the personal relationships they have with each parent.
Children will naturally be torn, upset and worried about how the divorce will affect and uproot their lives.
One strategy that parents use to address and minimize the upheaval is to include the children in the selection of the next home, as opposed to separating or isolating the children and not giving them a voice in the decision of their future.
Parents should always remember what’s in the best interest of their children first and foremost. To understand and examine the unintended consequences of the couple’s disagreements. Bottom line, when children are involved, it should be the priority to have the children have a voice, and to keep the parent’s self-interest as secondary.
DEFERRING THE SALE FOR A LATER DATE, AND SHOULD YOU CONSIDER IT ON THE CHILDREN'S BEHALF?
A Deferred sale is an agreement between the spouses or ordered by a court, to not sell the family home for a period of time.
Deferring the sale may make sense if you’re waiting for the real estate market to improve or if your child is still a minor and you don’t want to uproot them from their school.
However, if you do agree to defer the sale of the home, then the couple will also have to reach an agreement regarding who’s going to pay the mortgage, taxes, insurance, maintenance, and repairs until the house sells.
PROFESSIONAL TEAM TO HIRE TO GET YOU THROUGH THIS PROCESS
Though it will vary depending on your situation, there are several types of professionals you may consider hiring to help you get through your divorce.
An experienced real estate agent or broker to sell your home
- Handles all home preparations, manages contractors and stagers, all marketing activities, negotiations, and closing paperwork
- Protects the success of the home sale from disagreements in a divorce
- Serves as a neutral third party between divorcing spouses, someone who does not take sides and communicated equally to both parties
- Someone who is trusted and will keep your confidential information confidential.
A professional divorce attorney to represent your legal interests
- Prepares final documents and appears in court
- Legally represents only one party, and works in their best interest at all costs.
- Educates clients on the division of marital property and the scenarios that could complicate a divorce case.
- Examines all financial records and calculates how the to divide assets
- Fixes bad agreements from mediators or other attorneys
- Discourages clients from behaving out of spite (i.e. suing a spouse) when it’s not in their best financial interest
A mediator to counsel you through tough decisions
- Helps you and your divorcing spouse reach an amicable agreement more cost-effectively than through an attorney.
- Works with you through the issues of property distribution, child care, retirement, taxes, and more
- Prepares documents so that you file the divorce correctly and legally