Divorce your house when you divorce your spouse
Divorce is never a happy circumstance, and the financial necessity of selling your home as a result can compound the emotional stress.
Still, even if you're inclined to keep your house post-divorce, selling is oftentimes the best solution, even if it means taking a loss, according to Carl Palatnik, principal of the Center for Divorce and Finance, a financial planning firm in Melville, N.Y. Indeed, Palatnik says, the choice to sell is much more common today than it was in the past.
Unfortunately, once you've made the decision to sell, all your questions haven't been answered. Here's a list of factors to consider once you've decided to sell your home, post-divorce:
Proceeds. One of your first questions should be how much money will the sale net, who will get what share of the total and what will the tax implications be? That's according to Jerry Cohen, principal of California Divorce Financial Planning in Woodland Hills, Calif. He says he advises spouses to run the numbers before they put their home on the market.
If your mortgage debt is more than the value of your house, you'll also need to think about how you'll afford another place to live and whether your lender might try to collect the deficiency on your loan, a prospect that's allowed in some, though not all, states.
Timing. Another high-priority question is whether to sell your house immediately or sometime further off in the future, according to Lili Vasileff, president of Divorce and Money Matters, a financial planning firm in Greenwich, Conn. Factors to consider include your children's ages and local housing market conditions. If you have school-aged children or home prices in your area still haven't begun to recover, it might pay off to delay the sale.
Occupancy and decision making. The next issue is whether you or your spouse will continue to live in the house until the sale closes, and how much decision-making authority each of you will have during the sale, Vasileff explains.
"If the Realtor says you need to paint the front door, put in flowers and do it by tomorrow morning and the other spouse is traveling in Asia, it becomes very difficult to track them down and make sure they have a response time that's reasonable," she says.
Maintenance and repairs. One way to approach interim property upkeep as well as any costs associated with prepping or staging your house for sale, is for you and your spouse to establish a landlord-tenant relationship, Cohen suggests. While no landlord-tenant relationship exists in a legal sense, those roles can help to "frame who should do what," he says.
Trouble selling. You'll also need to plan for what will happen if your house doesn't attract a buyer, Vasileff says.
"There has to be language that if the house doesn't sell within -- pick a time -- six, eight, 12 months, the parties will decrease the price by XYZ or meet with a Realtor and re-evaluate why the house isn't selling," she says.
This might seem like grounds for a major disagreement, but Vasileff says most divorcing couples want to move on with their lives, not squabble about the sale of their home.
"The house has been, historically, their largest asset," she says. "They want the decision made. Whether they divide it, sell it or offset it (with other assets), it's a big piece of the puzzle."
Cooperation. Finally, you and your divorcing spouse naturally have different priorities. Still, cooperation is the most crucial aspect whether you're trying to decide on a sales price or who will live in the home until it sells.
"You want a clause that says both parties will be reasonable and not withhold permission in order to negate the sale or defeat the intent of the agreement, so they won't purposely be obnoxious or cruel," Vasileff says.
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