Some Real Estate Considerations when a Couple is Experiencing Separation or Divorce
1. Disposition – When spouses are separating, and there is real property, a decision needs to be made regarding whether the real estate will be sold or whether the property will continue to be owned by one or both of the spouses.
2. What is the net equity in the property?
3. Classification – Is it marital or separate or hybrid? If hybrid, how is the separate versus marital share calculated? How is appreciation on a separate handled?
4. Terms of sale – If sold, what are the terms regarding preparation and listing and showing the property?
5. How will the net equity be divided upon sale?
6. What if the sellers are required to bring cash to the settlement table?
7. If it is to be transferred to one spouse, will there be a requirement for that spouse to remove the other from liability on the mortgage or other liens against the property?
8. Is the party keeping the property buying out the other’s interest?
9. Structure of a buyout – Is the buyout a lump sum of cash or is the buyout via a transfer of some other asset? Timing?
10. Other considerations – What are some issues that spouses sometimes consider when negotiating a buyout? i.e., repairs, monetary and non-monetary contributions, risk incurred on the mortgage, imputed costs of sale or capital gains tax, refinance expense, moving and/or set-up costs for the party signing over their interest in the house, personal effects, and staging the property for sale.
11. If jointly titled, will there be a transfer of ownership on the Deed and if so when and how will it be titled in the future?
12. How are expenses paid until the property is transferred to one spouse or sold?
13. Who gets the benefit of use of the property until it is transferred or sold?
14. If the couple is going to co-own for a period of time, what are the pros and cons?
15. Tax considerations – mortgage interest deduction; property tax; other?
With all this detail needing to be resolved, what processes are available to maximize the ability to reach an agreement and work through the details without delay and a lot of expense in court? Consider Collaborative Divorce, especially if the matter is legally or emotionally complex. Mediation may be an alternative, especially if the situation is more straightforward and it appears that the parties will be able to reach an agreement without the need for a team of professionals working together. If the parties are in agreement, one should have his or her attorney prepare a draft settlement for the other party’s review and consultation with that party’s attorney. If issues arise, it is important to be open to using Mediation or Collaborative Divorce to reach a settlement without litigation in court. If an out-of-court settlement is desired, use divorce professionals who have experience and training in Collaborative Practice and Mediation and attorneys who have had positive experience working together in reaching settlements for their clients. A well thought-out plan before listing the property and/or moving can prevent problems down the road.