5 Ways To Handle The House In A Divorce
If there is one thing that I see divorcing couples doing wrong more often than not, it is the decision on how to handle the house where the couple has lived.
While I am not a lawyer and I'm not dispensing legal advice, take it from somebody who has helped hundreds of divorcing couples, there is a right way (and a wrong way) to handle the house in a divorce.
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VIDEO: How To Handle The House In A Divorce
Five Ways Of Dealing With Real Estate In Divorce
So what should a couple do with the house that they own when they decide to put an end to their marriage?
Common sense leads to some simple solutions, but sometimes simple is not the best course of action. Some of the ways I've seen splitting couples handle the house in a divorce include:
- Continue Owning The House And Continue Living Together - While this one might surprise you, it is not uncommon to see ex-spouses live together for a period of time during and after a divorce. Typically, I see this done in an effort to "soften the blow" on children or to keep expenses low for a period of time.
- Continue Owning The House With One Spouse In Residence - Much like the solution that preceded this one, this choice is often made to reduce costs and to create a less-crazy transition for the children. If I were to hazard a guess, I would think that two-thirds of all divorcing couples choose this solution. Sometimes each party contributes to the mortgage, other times the payment is made by just one party.
- One Spouse Buying The House From The Divorce - This is a popular option for divorces where the property has some family history. Perhaps the wife grew up in the home and would like to continue living there. Or maybe the husband had the home built to his specifications prior to (or during) the marriage. As we will demonstrate below, this potentially good solution usually works out poorly (but it does not have to!).
- Sell The House Prior To The Divorce - This is the least convenient solution for most divorcing couples, as it requires both parties to work together to sell the home while also requiring each to find a new place to live. Below, we take a strong look at this option, one that rarely is chosen by divorcing parties.
- Sell The House After The Divorce - Much like the choice above, this choice removes a significant joint asset and (likely) joint liability from the divorced couple. Most couples think it will be more convenient (or better for the kids) to sell a home after the divorce, and oftentimes the parties agree to extend the ownership period to allow for one of many reasons why it might be more convenient for the residing party.
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What To Do With The House In A Divorce
After helping hundreds of families through the process of selling a house due to divorce, hindsight has taught me that there is really only one way of doing this properly.
They say that the road to hell is paved with good intentions, and I believe it is typically the good intentions of both parties in most divorces to choose a smart solution.
Unfortunately, the emotional rollercoaster that is a divorce often leads to one or both parties having a change of heart, and the unfortunate result often leads to a negative consequence for each party.
The only "good choice" for each party is one where the parties no longer shares ownership of the property nor shares liability for any monies owed on the property. While is it common and normal for a married couple to share ownership of a house and a mortgage, it is definitely a mistake for "warring parties" to do the same.
Even if the divorce and the subsequent relationship is congenial, there are still other considerations that promote the termination of all joint agreements and holdings.
- What happens if the ex remarries?
- What happens if the ex faces financial trauma?
- What happens if the congenial relationship hardens?
I do not wish to regale our readers with any of the horror stories that we have witnessed when helping a divorced couple try to sell the home, but I will share two examples that we see from time to time.
I find it crazy to think that divorce attorneys will allow a divorced couple to maintain ownership of a home yet provide no agreement on how each issue above is to be handled.
Why Houses Must Be Sold Upon Divorce
For the first example, let's say Bob and Mary decide to divorce. The divorce agreement calls for Mary and the kids to stay in the house while it is being sold, and Bob is to make payments until the house is finally sold. There may or may not be an agreement on how many payments Bob is committing to.
After one payment, Bob loses his job and stops making payments on the property. In fact, Bob spirals into a pit of despair and is never heard from again. Sure, his credit is ruined, but now Mary must figure out how to make payments or her credit will be ruined too. And if Mary does not get the home sold in time, some or all of the equity could be consumed by late fees and lis pendens filings that occur when a few payments are missed. On top of that, the closing could be delayed when the title company cannot track down Bob. (We have observed similar scenarios on multiple occasions).
As a different example using the same couple and the same agreement, what happens when Mary decides that Bob is a jerk and she's not going to let any Realtors show the home? What if she does not maintain the home and yard and works hard to "NOT" sell the home. After all, she is living there for free, right? How can Bob force a sale? Does he first have to evict his ex-wife who has a right to live there free of charge (yes, we have seen this scenario often as well)?
Real Estate Advice For Divorcing Couples
My best (NON-LEGAL) advice for BOTH parties to a divorce is to require the sale of all real estate immediately, requiring both parties to evacuate the property at the same time and working for a fast sale in order to satisfy all liens and debts so that neither party can be harmed by the other due to the house and its encumbrances.
Simply put, if you are getting divorced, sell the house immediately. If there is not enough equity, short sale the house immediately. DO NOT let the house become a joint liability to divorced parties, it rarely works out to the benefit of both parties.
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