The end of a significant relationship is often so emotionally taxing that couples do not go through the proper channels as they divide their assets and move on to the next chapter. While this is completely understandable, it’s important that both parties advocate for themselves, and work together one last time to come to a reasonable consensus.
Here are insights that you can use as you decide what to do with your house after a divorce or separation.
Swallowing your pain and getting down to business
There are plenty of stories out there about spouses who conceal money or bank accounts from their partner, but the house is one asset that can be a transparent source of income for both parties. That’s why, even if you suspect your former partner isn’t going to be honest about other finances, it’s important that you agree to remain amicable and proactive about the decision you make surrounding your home. If your partner disagrees, it may be time to hire a mediator who can help you set ground rules for what’s to come.
Option 1: One partner stays in the house for now
When making a plan for the house, many couples choose to have one partner remain in the house. Often, this is because they want to create a smaller impact for their children. With one partner remaining in the house, the kids can stay at the same school, play on their same teams and be involved in their usual activities. If this is the case, be sure to work with an attorney who can recommend how to split the cost of the mortgage. While it may be tempting to focus on the short-term, it’s also imperative that you decide now if there will be a 50/50 split on the house once you eventually sell, or if one partner will have a larger share in the end.
You may also want to discuss, in general terms, what kind of conditions will be required to eventually sell the home. Will it just need a coat of fresh paint, or will you still need to jointly replace the furnace as you had previously planned? If you’re on good terms, suggest that one partner pay for the “fix-up” costs, and then recoup those costs at closing. That way, you can avoid having to pool your future finances in order to get the carpets cleaned or repaint the walls. Both partners should agree on each fix, unless otherwise stated, and the “fix-up” partner should save every receipt to reduce gray areas later.
Option 2: One partner buys the other out
In the case that you want to buy your partner out, or your partner wants to buy you out, you’ll need to work with a mortgage loan officer. Essentially, if both partners were on the title, it means they qualified for the loan together. Now, the partner who intends to stay must qualify for the loan on his or her own — and they must receive the express approval of their lender to take over the loan (and title) individually.
If the approval is given, it’s still important to have a lawyer examine the home’s title once the process is complete. The updated title should only have the buyout partner on the documents. “The new mortgage will also require a new title policy. Although you will be insuring the lender and not yourself, this process will give you relative assurance that your partner has not further encumbered the property without your knowledge,” said Edina Realty Title President Brad Fisher. “Any buyer should always consider purchasing an owner’s title policy at closing for a one-time fee based on the price of your home. Your owner’s title policy will pay for court costs and related fees of any covered title risk,” he added.
Option 3: Selling the house
Obviously, there are a lot more variables in play if both separating partners intend to sell the house. First, you should discuss if you want to sell it immediately or if you’d like to rent it until you feel the market hits its peak. Some couples may agree not to sell the home until it has reached positive equity.
If you plan to sell now, start by hiring a non-biased REALTOR® with plenty of experience in your market area. Now, more than ever, you’ll need the insights of someone who is working on behalf of both of you to get the process complete. While it may seem tempting to hire a trusted family friend or relative, it’s important that you choose someone completely neutral, but who has been made aware of your circumstances.
Next, you should have open discussions about sales price and listing date. Be sure to determine an initial list date and come to a consensus on who will pay for any repairs that need to be made to the house. (Again, it may be helpful if one person agrees to pay for these renovations and is then repaid for those costs after the sale closes.) You likely want to sell your house quickly, so ask your Realtor for insights about when you should lower your sales price, and by how much, in order to achieve a faster sale.
Before you list the home, be sure to come to an agreement on what percent of the home’s sale each partner will receive upon closing. To ease the stress on the buyer, make a plan to receive one payment at closing, which will then be distributed to each party as agreed.
If you prefer not to attend the closing together, one partner can attend and the Realtor or attending partner can fax the final documents once the process is complete.
Working with professionals
There’s perhaps no better time to use a professional Realtor than when you are in the throes of a difficult separation that requires selling your family home. Not only do Edina Realty’s 2,300 Realtors work with buyers of all different life stages every day, they also live up to a code of ethics that they take very seriously. During this time, you can rest assured that our Realtors will handle your property (and you!) with honesty, kindness and respect.