Selling a home for any reason can prove to be a stressful experience—and when you couple the process with the trials and tribulations of divorce, well, things can get complicated. As is the case with any complicated undertaking, the value in putting forth a thoughtful plan of attack—one on which both sides are 100% aligned—simply cannot be overstated. Here, some tips on how to proceed in a way that will preserve both your interests and your sanity as you embark on the next chapter of your life.
RULE #1: SET EXPECTATIONS
Just imagine how infuriating you’d find it if your soon-to-be-ex-spouse were to take it upon him or herself to lead the charge on selling the home you purchased together and then either a) left you in the dark with regard to situation’s status and progress, or b) showed a complete lack of regard for the way you’d prefer to go about things. Obviously, either scenario would add insult to injury, but perhaps even worse than that, either scenario would leave you guessing as to whether the transaction could have been handled in a way that ultimately would have yielded a better financial outcome for you both. In order for you both to get the most out of an inherently strained situation, expectations must be set, and both parties must be on the same page.
It might sound easier said than done, but if coming up with a solid plan for success means swallowing your pride, so be it. It may be helpful to remind your partner (and, if need be, yourself) that you both want the same thing here—a smooth, timely transaction and the highest possible sale price for your property. Make that very simple notion the “north star” of this process, and we guarantee it will be easier to align on the details that will make it all come together.
Sit down together, decide on a protocol, and make a pact to stick to it. If sitting down together is not something you can bear to do, then get the conversation going via email. It doesn’t matter how both parties agree to communicate, make decisions, review offers, and coordinate schedules for home showings. It’s just imperative that you do. And even if the discussion and the situation in general is completely amicable, recap what you’ve agreed on via email. Make a shared document with a list of to-dos that you both can update in a transparent fashion. Do whatever you need to do to ensure it’s understood that your weekly status update call is to take place on Monday evenings, and that home showings are not to be scheduled on Saturdays before 2 pm.
Empower your partner to proceed in a way that doesn’t create any unnecessary disagreements or drama, and give yourself a leg to stand on in case he or she doesn’t hold up their end of the bargain—it will be much easier to refer to details you’ve mutually agreed upon and actually have in writing should you need to address them not holding up their end of the bargain.
SOME QUESTIONS TO PONDER AS YOU THINK THROUGH ALL THAT NEEDS TO BE AGREED UPON:
- How will the real estate agent be chosen? Is one party responsible for coming up with a short list of potential candidates? Will both spouses interview agents together? Is there any kind of minimum bar for qualifications (e.g. has worked in real estate longer than 20 years, has experience working with divorce sales, has experience specific to zip code, etc).
- How will the price of the property be set? Once the real estate agent comes up with the framework for the decision, what do both spouses need to do to make it official?
- Under what circumstances will the listing price be reduced? In other words, how long must the home sit on the market before the price is lowered, and by what percentage will the price be lowered if it comes down to it?
- Who is the main point of contact for the real estate agent? Can one spouse be designated to take calls, or must all correspondence take place over group emails, conference calls and meetings with both parties present?
- What is the approval process like when offers start to pour in? Must both spouses approve formally? If so, will a phone call suffice or must it be in writing? Is there an agreed upon dollar amount that would trigger an “automatic” acceptance of an offer, or would either spouse prefer to negotiate no matter what?
- How are the proceeds to be distributed, once the home is sold?
THINK BEFORE YOU MOVE OUT
Generally speaking, in the state of California, any property acquired during a marriage is owned by both spouses, with the exception of instances where said property was inherited by one spouse. However, if only one spouse is on the title, then the home may be considered the sole property of that spouse. Ownership of the property—and the way it’s accordingly split up between both spouses—is likely the first matter you’ll want to discuss with your attorney, as every case is unique. And, to be clear, it’s not as though moving out of the home you purchased with your spouse will mean that you forfeit your interest in the property. With that being said, from a practical perspective, voluntarily moving out of the house during a divorce in California is likely not the best idea.
When a spouse moves out, questions like “Who’s going to make the mortgage payment?” arise. And in instances where both spouses are not contributing equally, those questions have complex implications. In addition to the mortgage payment, let’s not forget about property taxes, insurance and the like. The bottom line? There’s more to consider than how you’d like to live your life for the next several months. Until you can review all the specifics with your trusted legal counsel, do what you can to tough it out. Sleep on the couch if you must—remind yourself that small sacrifices now could make a meaningful difference in the end, and that this, too, shall pass.
FIND A TRUSTWORTHY (AND NEUTRAL) REAL ESTATE AGENT
Selling a home for any reason whatsoever calls for the guidance of an experienced real estate agent—and under few other circumstances is the quality of that guidance as critical as it is during a divorce. You’ll want an agent who not only ticks the standard boxes, but if at all possible, one who specializes in working with couples going through this difficult process and has proven her ability to treat both parties in a way that’s professional, equitable and unbiased.
All things considered, you may decide it’s not the best idea to enlist the help of the agent who helped you and your spouse purchase the home. So long as you decide on the right agent together, and so long as each party has the power of veto, things should move along as smoothly as possible.
UNDERSTAND CAPITAL GAINS LAWS
As though the divorce itself weren’t difficult enough without all the financial implications, the financial implications are plentiful—and chances are, there are several you probably haven’t even considered. Take, for instance, federal capital gains taxes. Did you know that through these laws, there is a significant advantage to selling a home while in a marriage as opposed to selling while single? During marriage, you can exclude up to $500,000 in profit from federal capital gains taxes. Not married, exclusions limits are about half of that.
As is the case with all the details in this process, you’ll want to weigh out every option with your real estate agent—and perhaps even your attorney—to understand precisely how each outcome affects you financially. Perhaps your situation is such that selling the home before beginning divorce proceedings makes sense for all parties. Regardless of your situation, understanding the ramifications of each scenario and each option will allow you to rest easy knowing you’re proceeding in a way that is logical and informed.
WHAT ABOUT A BUYOUT?
It may be that you—or your soon-to-be-ex-spouse—would actually prefer to keep the home and buy the other party out. If this is the case, there are several ways to go about it, and just to be clear, a “buyout” does not necessarily mean a cash transaction. Let’s say that spousal support is being negotiated at the same time the prospect of selling the home is on the table. In that instance, the party who will be paying spousal support may be able to leverage their share of the home’s equity to lower their monthly support payments. Given the facts that are unique to every particular divorce, the manner in which the spouses and their attorneys go about the buyout will vary. If a buyout is on the table, you’ll need to consider the following questions:
- If not with cash, will one spouse buy the other out via a refinance? Or will there be a loan modification, or even a personal loan? On what terms (i.e., timeframe) will the buyout amount be paid?
- How and when will the spouse being bought out be removed from the title?
- Same with the mortgage loan, if there is one—how will the spouse being bought out be removed from that?
TRUST YOUR AGENT TO LEAD THE WAY
Whether it’s a decision of monumental significance, like timing the sale of your home to ensure you take full advantage of federal capital gains laws, or a seemingly less important choice, like how to make your home attractive to prospective buyers, you should never lose sight of the fact that you’ve hired a professional to lead the charge on these matters. Why waste time worrying—let alone, squabbling—over things like pricing, staging, and marketing strategy, when you have at your fingertips the expertise and wisdom of someone who has done this all dozens, if not hundreds of times already?
The best part about letting go and allowing your agent to take the lead? You’ll remove as much emotion as possible from the process. Your agent is approaching each of these decisions from a business perspective, and is proceeding in a way that will maximize the return and minimize stress. Taking a step back and trusting him or her to complete the task at hand will remove at least a small layer of stress from what’s certain to be one of the most challenging phases of your life. Reach out and we’ll connect you with a knowledgeable, trustworthy agent to take the reins.