Interest rates are at historic lows and divorcing couples and people in general are buying and selling homes in increasing numbers. This exasperates the already common question – “What happens to a couple’s home during their divorce?”
Interest rates on home loans are currently very low as compared to historic rates and as a result the real estate market is seeing increased activity. These historically low interest rates have upped the demand for real property and home sales and purchases are increasing. This increased interest in real estate has made selling a home easier for home owners, including divorcing couples.
However, does a divorcing couple have to sell the home? The answer to this question is often yes even though interest rates are low and demand appears to be higher. For example, absent an agreement by the parties, a community property home would ultimately be listed for sale in California by a court’s order. However, practically speaking, it might make sense not to sell a house from a financial point of view and divorcing spouses can agree not to sell a property.
For example, they may agree to continue to own the home together as business partners. Another common scenario is if one spouse wants to keep a home; He or she might offer to equalize the other party by providing him or her with an amount equal to the amount he or she would have received if the house was sold (buy the other party out). This may make sense because it cuts out commissions and fees that would go to third parties if the house was sold.
If the home has a mortgage, a condition to an equalization buy-out would likely be that the party who is keeping the property refinance the home within an agreed-to period of time. This would remove the other party’s obligation to the lender. Fortunately, for the time being interest rates appear to be very low and for that reason now appears to be a great time to refinance anyway. A barrier to this type of arrangement would be if the spouse who wants to keep the home does not qualify for a refinance on his or her own (alone). In other cases an equalization negotiation will fail because the parties do not agree on a home’s value.
Another possibility is a delayed sale. In some rare cases a judge may order a house be sold at some point in the future if a child is living in the home and the judge believes a delayed sale would benefit the child and not harm the parties. However, absent an agreement the home would be listed for sale at some point.
The parties must try to agree upon a real estate agent to use if a home is going to be listed for sale. Divorcing spouses frequently disagree on which agent to use. A common solution is for one of the parties will research agents and then provide the names of three or more agents to the other party. The other party may then research these particular professionals and then select one. Many real estate agents will reduce their commission percentage to make themselves the most attractive choice. This may result in both parties saving hundreds or even thousands of dollars in commission fees.
“Aside from the interest rates stirring real estate activity, there are omnipresent critical considerations a divorcing couple should make if they are going to sell a home,” informs Michelle Wright, a prominent Realtor in Naples, Florida. Wright explains that the spouses should work together to select a real estate agent they believe in and trust. She states that a dedicated real estate agent will do all the necessary legwork, listen carefully to each spouse to make sure to understand the collective needs and will always be alert to their necessary time frames. Wright states, “I think it is vital to have an agent who is truly interested in achieving their client’s goals and who has the time and gumption to follow through to properly market a home.”
She adds that a divorcing couple should always research and interviewing possible agents. Wright adds, “Look to see if the agent grasps your collective objectives and you should ask prospective agents for references so you can call their past clients. Ask these past client if the agent was able to prepare and implement a plan that the he or she was able to understand.” It is always important to thoroughly research any professional you work with and speak with several before selecting one. If a proper agent is selected both spouses may end up happy.
AUTHOR: Attorney Lance Claery, Claery & Green, LLP
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.