The dreaded “D” word- Divorce. Unfortunately, it happens. And the process of going through a divorce is not easy. Even the most amicable separations are plagued with disappointment, lack of communication, and failed expectations. In the best-case scenario, two people who are dissolving their union will work together to resolve their differences productively and part ways, hopefully without drawing blood. Unavoidably, though, during the process, you and your spouse’s emotions will fall prey to a myriad of changes as the marriage, family, and shared assets are legally separated.
Adding to the stress is the sale of the family home, which is typically the largest asset of the marriage. This can evoke tremendous emotion: sadness, anger, sentiment, and disappointment, to name a few. The combination of the stress of the divorce with the sale of the family home requires patience, diligence, and great personal fortitude. With the help of seasoned, experienced professionals — such as attorneys and real estate agents — divorcing couples can successfully move through this challenging phase of their lives and on to their future.
The phrase “this too shall pass” has long been a source of comfort for many throughout history, including Abraham Lincoln, the English poet Edward Fitzgerald, and the writings of the medieval Persian Sufi poets. It’s a simple phrase, but one worth keeping in mind. No matter how bad “it” gets, it will eventually pass. The divorce will become final. The house will sell. The children will adapt, and life will go on. This is where that personal fortitude will come in very handy.
Selling a Family Home During a Divorce
Decisions regarding the family home are not only emotional but mired in legal maneuvers and decisions as well. Divorce laws vary from state to state, so your licensed legal counsel is your best source of information on how to protect the interests of both parties.
Many questions arise when trying to sell your home during a divorce. What needs to be done to ensure a quick and profitable sale? Who will choose the Realtor®? When is the best time to list a home? Who bears the financial responsibilities of the sale? You can proactively allay your fears and clear up misconceptions by doing your due diligence and researching what to expect throughout the selling process.
Every divorce has a unique set of circumstances. This article is not intended to be a legal guide or a way to dispense legal advice but to provide you with a source of information regarding the sale of your marital real property. Becoming familiar with some real estate terminology and options will give you a better understanding of your situation and confidence that, indeed, “this too shall pass”.
Community Property States
Some states are known as “community property” states and others are defined as “equitable distribution” states. Community property states follow the rule that all assets acquired during the marriage are considered “community property”.
There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska is an opt-in community property state that gives parties the option of making their property community property. The remaining 41 states follow the laws of equitable distribution, which means property acquired will be divided between the spouses in a fair and equitable manner.
Treatment of Debt in a Community Property State
The court determines who receives what, based upon a variety of factors, such as the relative earning contributions of the spouses. In community property states, on the other hand, all income and assets earned or acquired during the marriage are considered to be equally owned. This applies to all debts, no matter who created the liability. In a divorce action, these will be divided equally.
In addition, there are mutual court orders that automatically protect marital properties. An automatic temporary restraining order prohibits spouses from selling, transferring, or borrowing against a property when a divorce is filed. Again, any orders should be discussed with your attorney, as this protection varies from state to state.
Mortgage Deed vs. Property Title
The family home is typically a couple’s most valuable joint asset and must often be sold in order to equally distribute its value between the two spouses. Therefore, it is vital for you to understand the relationship and difference between a mortgage deed and a property title. Mortgages are conditional legal agreements made for the purpose of buying a property/home. The lender’s security interest is on record when the title is registered. The mortgagee (lender) may obtain a foreclosure order to take possession if payments of the debt are in default.
A property title refers to ownership of that property and the right to use it. A person on the title can transfer ownership to another party but cannot transfer more than he or she owns. Some divorcing couples utilize a quitclaim deed, which transfers ownership from one spouse to another, but it does not transfer financial responsibility. One spouse may transfer the title of the home to the other and consider him or her free from the financial responsibility of the mortgage payment, but this is not the case. The loan payments are the responsibility of the parties on the mortgage. In order to change the names on the mortgage, one spouse must obtain financing with which to buy out the other.
Educating Yourself About Real Estate When Going Through a Divorce
It’s important to educate yourself and know the basics of real estate when going through a divorce, and the division of property and sale of the family home. You do not want to be blindsided by the complexity of the real estate division. Especially, during a highly sensitive and stressful process that an emotional divorce can bring. Remember, all discussions regarding mortgages, quitclaim deeds, and the title of the property should be conducted with your legal adviser. Going through a divorce is extremely difficult, and there are many factors and moving parts that need to be addressed during the process. It’s important to find the right legal representation that can direct you, and look out for your best interests during the division of your most personal and memorable asset- the family home. Again, the intent of this article is to provide information regarding the sale of your home within the framework of a divorce; it is not intended to provide legal counsel or advice.