What Happens To The House When You Divorce?

Published: January 6, 2017 at 6:26 am

Divorce is never easy, but dealing with the separation of assets can make it exponentially more difficult and emotionally painful for both parties. You can’t split a house without selling it! And since their home is usually the couple’s largest investment, what happens with it often becomes the focal point discussed during the divorce proceeding. Here, we consider the various facets of a homeowners’ mediation process during a divorce and the various options you have when you need to liquidate the equity of your home.

If there is no prenuptial agreement, who should get to decide what is done with the home? If they choose to sell, should the divorcing couple go the traditional route with a listing and a real estate agent, or sell the house fast to an investor in order to cut emotional ties as quickly as possible?

Ideally, shared assets would be split right down the middle and the discussions would end there, but unfortunately, this is not usually what occurs.

Prenuptial agreements get judged harshly because of what they imply in a marriage; one partner doesn’t trust another enough to share everything. Most people think that if this is the case, why should a couple get married in the first place? In reality and out of the spotlight, prenuptial agreements are actually a great way to clarify things in a marriage. Prenuptial agreements allow couples to sit down and divide assets for future beneficiaries, protect either party from debts and clarify financial rights. They can also be a good way to make sure a potential divorce doesn’t get too messy, by making sure things like houses and cars are spoken for long before the marriage begins to fail.

If there is a prenuptial agreement in existence, the divorcing couple can sigh with relief, knowing that the asset division will be quick and easy. If not, they may have to turn to the courts to divide assets, a process that can be messy and drawn out, sometimes ending in a court ordered sale of the house and other valuable property. Here are the different ways assets can be divided.

Option 1: One Party Stays in the House

In some states, the court divides assets between the two parties of a divorcing couple by way of a policy called “communal property”. In the rest, assets are divided through a statute called “equitable distribution”. In both cases, the house is considered shared property, so it must be given to one party or the other.

In most cases, this is the spouse that maintains custody of the children, because the courts don’t tend to rule for drastically shifting the life a child. However, since both names are on the deed for a home, this process can be sticky and may hold together the two parties of a bad marriage for too long, causing excess emotional pain and grief on one or both parties.

Option 2: Home Sale by a Realtor at Market Price

If the couples respective attorneys can’t make a deal, the court may order the divorcing couple to liquidate the home as an asset and split the proceeds.

One way to do so is to go the traditional route, by seeking a Realtor or real estate agent and putting their home on the market at a fair price.

This is a way to get the most money out of your home, but it can drag on for longer than a couple might want to be in contact, and if they have a significant amount of unpaid mortgage on the house, the proceeds can be tied up in escrow for even longer.

For a marriage that doesn’t end amicably, this is not a great option. A couple that is feuding will likely opt to end their connection immediately instead of interacting for another year or more, albeit through a mortgage broker or bank representative.

Option 3: Sale By Owner

Homes that go For Sale By Owner (FSBOs) are homes that the owner wants to maximize proceeds on. By selling the home his or herself, the owner(s) of the home avoids giving a Realtor a cut of the closing price and doesn’t have to pay the associated fees.

In a divorce where the court mandates a sale, this is almost certainly not the best option. If FSBOs are successful, they usually end up with an uninformed homeowner taking an offer lower than market price, or taking an excessive amount of time even get an offer because they listed at above market price.

Most often, however, FSBOs fail, and divorcing couples are left having to deal with each other for however long it takes to list the home with a realtor and find a sale the traditional way.

Why? Because Realtors have databases with the home prices in your area and in a given market so that the price of your home can be consistent with your region and economy. This ensures as close to the maximum profits from your home as possible. Additionally, most homebuyers are found through the Realtor’s network of connections in the industry, so if you don’t list with an agent, buyers may not even be able to find your property.

Option 4: Selling Fast to an Investor

This option only has one downside: the couple won’t be able to get the same profit out of the sale as they might with a Realtor, but the upside is massive. The house is sold almost instantly. There are two scenarios in which this can be a massive relief for divorcing homeowners:

1. The Divorce Was Not Amicable

If two people separate and the proceedings are anything but civil, a prolonged listing of their property will result in additional grief and anger. By selling fast and splitting a cash profit, a couple can get closure from an unhappy marriage and avoid undue pain.

2. The House Is Underwater

When the divorcing couple doesn’t hold much equity in the home, or has negative equity, or are facing foreclosure, most Realtors won’t touch the listing. If a court orders a sale, however, the couple won’t have much choice in the matter.

In this case, selling the house to an investor and walking away isn’t just the smart choice for the civility of the marriage, it’s a smart financial move as well. The couple will almost instantly have cash to start their new, separate lives and won’t have the burden of a home that’s racking up debt.

For this, SellHouseFast.com can help. We’ll match your home with interested investors in your area so that you can end the nightmare of divorce and/or looming debt and start over. For more information on how to settle your court ordered sale fast and get closure in a messy divorce, contact us and get an estimate to set the process into motion quickly and easily.

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