Till divorce do us part

Three options to take selling your home, when divorce is the only option.

Look sometimes marriages fall apart, it’s the elephant in the room no one wants to talk about. When this happens what exactly are you both supposed to do if you have joint ownership in arguably your largest asset?

Here are a couple of options that will allow you both to have a roof over your head. Take a look below.

Option 1: Split the profit

Sometimes the easiest method is to just sell the home and split the profit. It could save you both a lot of time and give the least amount of headaches.

However, you might need to consider what the market is saying. If the market is down you may want to hold back and consider to rent out the property instead.

Now let’s say you’d be able to sell at a profit, you’re going to want to watch out for capital gains tax. An individual can exclude up to $250,000 in capital gains on the sale, and a married couple filing jointly can exclude up to $500,000. So with this in mind you might be able to find more flexibility. Consider agreeing to use that money to pay off the legal expenses of your divorce.

That said, many people are understandably attached to a home, or decide that remaining in it is best for the children. In which case, consider the next option.

Option 2: Buy out or get bought out

Before you make the decision buy out your partner, it’s important to find out if it’s financially attainable. And, although it may be extremely challenging-  it’s important to remove emotion from the equation. At this point is about moving forward with your respective lives and being able to grow as an individual.

I had a client who wanted to keep her Five bedroom home although her two adult children were leaving in the summer for college. I asked, “ What’s this house going to feel like in a few months? Are five bedrooms top priority for you even with the kids leaving? Would it make more sense to sell your home and rent or buy a smaller property within the same community?” As difficult as it was for her to make it a “Business Decision”, she decided that a five bedroom home for her alone was too much and did not make sense.

Whether you’re the partner staying or going, make sure the buyout terms sound fair and accurate.

Whether buying your former spouse out or being bought, be cautious. I recommend paying for an appraisal to determine what the current market value is or reach out to a real estate agent ( you can call me) to obtained a detailed Broker Price Opinion (BPO) on the market value of the property. Once you have a clear idea of what the home may be worth , you can negotiate a “purchase/buy out price” . If the amount being offered doesn’t sit well with you—on either side—don’t feel the need to settle, obtain a second appraisal  or BPO before moving forward.

Option 3: Delayed buyout

If you (or your spouse) wish  to keep the home but you’re unable to purchase it at that moment, another option would be to delay the buyout.

For this the spouse that stays will continue to make monthly payments until he/she can afford to buy out the other.

Be ready for the potential headaches if you are choosing this option. Long-term ones. This option may lead to conflict or tension  as typically the spouse waiting on the payout may, and frequently, becomes inpatient.  And, emotionally, the real estate is still keeping you tied to one another versus being able to move on.

If you’re the spouse whose allowing your former partner to stay in the home, you’re in a vulnerable situation, particularly  when it comes to credit. Since, more-than-likely your name still appears on the mortgage, the balance of that mortgage will continue show up on your credit. And, I can’t tell you how often I’ve seen credits be ruined by an angry former spouse who refused to make payments out of spite.  This situation leaves you exposed to the possibility of damaging your credit and negatively affecting your ability to finance future purchases.

The best policy to avoid any messes is to bring all the what-ifs with a lawyer, and come up with a written plan of action. What if mortgage payments can’t be made? Who will do and pay for repairs? If these worst-case scenarios get addressed, it will help eliminate potential headaches.

Once you decide on a plan, don’t procrastinate- put your plan into action immediately so that you may move on and be happy again. A happier you, is a BETTER YOU!