When a couple is caught up in the excitement of purchasing a home together, odds are they aren't thinking about what will happen if they don't end up with their happily ever after. Even when someone has crossed all of their t's and dotted all of their i's with thorough paperwork in preparation for possible separation this doesn’t necessarily negate other important factors like children and the simple emotional toll.
Unfortunately, around 40 percent of Canadian marriages end in divorce. While it may seem that nothing is going to make this incredibly difficult situation any easier, there are many helpful support networks people can lean on. Sometimes it's as simple as getting a few answers to some big questions surrounding living arrangements, finances, and other logistics surrounding the separation.
Since separation is a delicate situation, it's important for a real estate team to use their expertise to help clients make this transition as smooth and worry-free as possible. Here is some helpful information about divorce and real estate that we've compiled to help make things a little easier.
Finding & Translating The True Value of Your Home
The first step in figuring out your real estate's value is securing a bank appraisal. This is how the banks will approve a mortgage in order to protect their own investment in loans offered.
Many appraisers can lean towards a more conservative valuation. However, the information provided in this assessment is commonly relied on if matters surrounding the home and the divorce end up in court. Others will seek another option, a market analysis/letter of option. This assessment would be completed by a local realtor and relies on analysis of the market value and market conditions based on past sales.
No assessment provides a guarantee of what the property may sell for, as this is only determined when an actual written firm offer is accepted and the property is sold.
Other Financial Factors To Consider Surrounding Property
There are a number of variables to consider about the equity of the property, including when the actual legal separation occurred, and the estimated market value at that time. Other factors to consider are instances when one spouse inherited money and invested it in the property if there is enough equity in the home for a buy-out to occur, real estate fees, and/or land transfer taxes on buying another property.
Working The Budget
Following the appraisal, the owners have to figure out who can actually afford to buy the other out (and if they want to) or whether they'd prefer to liquidate and divide the equity of the asset. In some cases, we have found the parents of the divorcees step in to help out one of the parties to buy out the other, to avoid having to sell it. Each spouse will need to verify with a mortgage broker or their lending bank to confirm they will qualify for a mortgage on their own. In cases where one party is in a new romantic partnership, sometimes they'll seek financial help there.
Affording Expenses For Upgrades & Staging
Often the sellers will use their family line of credit to afford any up-front costs associated with the sale, and then divide these expenses out of the proceeds of the sale. Other times one spouse pays these fees and the other gets less equity back, or something of that nature. There are other scenarios with tighter budgets where it might be possible for the realtor to secure staging fees included in the realtor fee which is paid when the house closes.
Standard Mediation Scenarios
A high number of modern divorces are handled by mediation, with decisions from the mediator being communicated to the real estate team, usually directly from the sellers, and not the lawyers. When necessary, a lawyer can communicate to the realtor any specific clauses necessary in the offer. We always encourage full open communication.
In terms of paperwork, there are many parts to the offer that already are legal and binding necessities. For example, if both parties are actually on the title then the sale has to be done with the signature and acceptance of all parties. And if not on title, but still married and this is the matrimonial home, there is a space where the non-owner spouse has to sign off on the sale.
There is an old real estate adage, "Location, Location, Location", but we say when it comes to real estate and divorce, the most important thing to keep in mind is "Communication, Communication, Communication". The best rules for agents are to never pick sides and to ensure that any important meetings are held either in person or by phone with all parties involved.
We make sure to provide a sympathetic ear, answer all of their questions, and in turn, ask a lot of questions of them about their needs. In some cases, a mediator can be helpful when pricing, selling, and other priorities are at odds since they can help to put priorities and/or decisions in place before selling.
Telling the Neighbours
Generally speaking, we encourage our clients to keep their divorce personal and confidential, but it also depends on how close they are with their neighbours. For the most part, it's not necessary to broadcast the situation and it's often better to be vague and imply downsizing, looking at all their options, taking advantage of the market or something that isn't very specific.
Motivation is a key part of selling any property and if the prospective buyers get wind of the reasons the place is on the market, this can potentially be used in negotiations. Some buyers believe that a house where people are splitting up has bad karma, which can also create a negative sales impact. Advice for those facing questions around motivation to sell is to talk about how much they have loved the property and stick with the truth without elaborating too much.
Budget-Friendly Temporary Living Situations
There are a number of budget-friendly living options that can allow a couple to separate while they figure out more permanent arrangements. Some people opt to stay with family, whereas others rent a longer-term AirBnB or an executive furnished rental. If things are on the more amicable side, some will stay in separate rooms in the same house, or even have one move into the basement or another slightly separated space.
Housing & Children
The more people involved in a separation, the greater number of variables are at hand. A good place to start is the mindset where nothing should be assumed. It's generally a safe option to avoid making major, hard, lengthy, or expensive commitments right away.
One potential is for one spouse to live in a communal investment property, or even to buy a condo that is a good option for the foreseeable future but a little more temporary - until they are ready to make longer-term decisions.
A relatively recent option that works for clients is called bird nesting when the kids stay in the marital home and the parents come and go when it is their allocated time with the children. Some find this to be a solid transitional option.
When kids go away to school, these types of arrangements become less of an issue, but the best interest of the children is what all parents are thinking of first. Parents need to be aware that school districts can be strict, so some research on district boundaries is important to research before selling.
The Best Timeline
Since each situation is individual there is really no hard and fast rule. Timelines will vary on how amicable the separation is, how much work needs to be done on the house and property prior to sale, the impact on the children (particularly if they’ll be changing school districts), and whether or not either spouse needs the money from the house to secure a longer-term living arrangement.
If you have any questions or you need a real estate advice, don't hesitate to contact us at