How to make informed decisions when divorcing, and keep emotions from complicating your transactions
Divorce is stressful enough without complicating the matter by disagreeing on how to divide or divest the family home, and other real property. While there are many laws that determine how to proceed with a sale in California, during my real estate career, I have seen several divestment scenarios associated with divorcing couples. Some worked out fair and friendly; other situations got bogged down by lots of anger and animosity!
There are several legal issues that must be explored once a couple decides to divorce, and real estate is in play. I always tell people under such circumstances to seek professional counseling, and/or retain an attorney.
One of the worse scenarios that I have heard of was a recent situation of a divorcing couple who decided to sell their property. They decided to handle the sale themselves, and, without attorney representation, retained a real estate agent.
During the selling process, the mortgage went unpaid for several months, with the intent of using the proceeds from the sale to play catch-up. The real estate agent who listed the property failed to provide pertinent documents, and failed to communicate the entire selling process. The agent’s guidance through the process was less-than-sound. The sellers failed to review documents with vital information pertinent to the sale — like the preliminary title report, which determines whether there were liens on the property, etc..
The sad outcome: The property went into foreclosure, leaving both parties with no recourse — or equity. By the time they sought counseling, it was too late! Foreclosure was scheduled only a few days after the plea for help.
How to have better outcomes
It is not my intent to give legal advice nor am I advocating divorce. If you have made the choice to part ways, here are seven things that, in my experiences as a real estate professional, contributed to favorable outcomes when selling real estate during a divorce:
- Consensus — Both parties agreed to divorce. When kids were involved, both parents wanted what was best for the children, with the least amount of negative impact.
- Representation — Each party had an attorney, or, the couple retained one mutually-agreed-upon representative.
- Expert knowledge — Both parties agreed a real estate professional should handle the sale. Both parties agreed upon a list price based on comparable sales in the area or upon a fee appraisal. Both parties were willing to make a price adjustment if the market demand did not support the list price.
- Constant communication — Talking between the principles is vital, whether among themselves or through representatives. When real estate professionals were involved, they worked with the principles and attorneys to work through legal issues, court orders and extenuating circumstances.
- Un-biased, market-driven transactions — If one party buys-out the other, a professional, independent appraisal value determined the payout. If a refinance was necessary to gain access to the equity in the property, the lender determined the value.
- Even distribution of proceeds — When calculating the payout, the party keeping the property either made an allowance for the selling costs and split the remaining equity (in case they decide to sell at some future date), or, the total equity distributed, with the anticipation that the property may appreciate over time and the selling costs recouped down the road. If a sale takes place in a less-than-favorable market, the person retaining the home understood they may take a loss after deducting the selling costs.
- Credit history protected — Mortgage, taxes, insurance payments and other household expenses were paid on-time during the sales process, and through the close of escrow. Maintaining good credit during this time is vital, since one or both parties may be likely to finance another property in the future.
Don’t let the current state of your finances drive your decision whether to seek outside help. Explore social services or financial counselors that work pro bono. If you have enough equity in the property, there are attorneys and real estate consultants who will wait for payment from the proceeds of the sale.
If divorce is the only recourse, get sound legal advice, work with qualified, experienced real estate professionals, and put in the work needed to understand the process. You have the right to the best possible outcome for all parties concerned. Call me today for help with navigating your choices.
Click through this online publication, “How To Get a Divorce in California” and dig into the topics listed below relative to divorce and dividing real estate and other assets.
- How can my spouse and I divide our assets under California divorce laws?
- Do our divorce laws allow a spouse to keep property or assets acquired before marriage?
- What do California divorce laws consider community property?
- How do our State’s divorce laws change?
- How are debts divided under California divorce laws?
- California divorce laws and reimbursement claims related to the home
- California divorce laws and inherited property
- What is considered separate property under our divorce laws?