Fairway Divorce Solutions

What are some of the other options for dealing with our home in our divorce/separation when selling it is not an option because it either will not sell or we would have to sell at such a loss that it simply would be financially unwise?

 

What to do with your house during divorce/separation?

Do we have to hold off on our divorce agreement until we can figure out what to do with the house?

The problem may couples are faced with is what to do with their home.  For most North American families, their matrimonial home is the largest asset they have and so at the time of divorce, it needs to be dealt with.  Given the current economy we are required to think out of the box with regards to different options.  Consider just a few:

1. Sell it

Certainly there is no harm in getting a real estate agent to list it and see what happens.  It is wise to work with your financial advisor to consider what the outcome would be at different prices so that when and if you are made an offer you know whether it is acceptable or not.  When working out the details of your “agreement” and assuming that your house has not yet sold you can incorporate a number of “what ifs” in your agreement.  What if it does not sell then…….. What will be the lowest price you will sell it for……………….. What if you cannot sell it then ………..

You do not need to hold off on your divorce just because you do not know the exact outcome of your home. Just simply address all the “what ifs”.

2. One person takes it and pays the other out for their portion.

This is what a lot of couples want to do especially if they can afford to and if they have children, they do not want to move. The reality is that usually this can result in too big of a financial burden for the party keeping the house.  If there are other assets that can be attributed to the other party so it does not require an increased mortgage then this might be viable.   Be careful to not be so attached to your four walls that you become a slave to your mortgage.  Starting with a clean slate and four new walls can be very cleansing and very positive for your children and you.  “Clean Break “discusses this in detail.  You also need to consider the economy so coming to agreement on the price at a time like this can be very difficult.  Do you use yesterday’s price, today’s price or tomorrow’s price? The answer is that there is not a correct answer so negotiating this price and be stressful.  There are risks to both parties in this volatile market so make sure you think out all the consequences to your decisions in advance.  Do not be so attached to keeping it that you lose sight of what that really means financially.

If you do choose to buy your spouse out of the house and keep it then you might consider a roommate.   Perhaps, if permitted, you could renovate for a low cost, your basement and have a basement suite.  There are lots of people having to relocate in this market so if you can provide a low cost alternative to renters then you might be able to offset the cost a bit.

3. You do not sell at this time.

Given the economy this can be a very viable option.  If you are in a position to ride out this recession then perhaps for the long term well being of your joint wealth, you could decide to not sell at this time.  You can certainly put an agreement together that would specify when you will either revisit selling or the timing for the sell regardless of the economy.  While this option is good for the short term (few years)  it  is not likely one that can last for too long, as the other party is going to want to get paid out.   You can put an agreement together whereby one party moves out and gets a low monthly rent elsewhere. You could perhaps decide that you will share in the mortgage plus the rent and remain joint owners.  The party moving out may feel like they are getting the short end of the stick so you could accommodate this by either attributing some interest, or a larger percentage of the proceeds to them to compensate for not getting their money right now and living in less than a desirable accommodation.  The key is to work with a team that can help you come up with creative solutions just for you. 

4. Remain roommates

After all Sarah and Andrew (the royals) tried it in a mansion and it did not work so why the heck do we think it can for us?  Well in fact like anything else in life, if we set our minds to it, have a plan, and remain positive almost anything is possible. I do admit that this is certainly for only a very few couples and for the many hundreds I have dealt with this might have worked for less than 5%.  The reality is once you are ready to move on ------ move on.  But it is an option worth at least mentioning.  So if you are going to attempt this, then buyer beware.  Set very very very clear boundaries. Have his and her joint space and his and her private space and respect these 100% of the time. Set out a budget for what you share and what will be separate. For sure have money separate at this time but perhaps have one joint account for household shared costs. Keep things a separate as possible and set the terms out as if it was a business deal.  Also, consider when to call it quits. Set the terms out now so that moving when it is time to move forward it is clear now.   This can work very well with two very confident well balanced parties but otherwise I would not recommend this option.

5. Have your parents buy your spouse out and then pay them back over time or ask for it simply to be addressed in their estate.

While we never want to go to our parents with our hands out this might be a onetime exception. Most of the wealth in North America is with this generation and so perhaps approaching them with a proposal of how they can help you now is not a bad idea.   In turn you certainly would expect to either pay it back or have it dealt with in their estate.  I have dealt with a large number of people that just refuse to even ask and I really think that is a false pride scenario in North America that simply does not exist in other parts of our world. Families do need to stick together and help one another out. They can always say no. 

6. Rotating living at home so that the children stay in the house and the parents come and go – week on – week off for example.

This option is not a bad one for the short term.  Many of our couples have found a short term place they can stay with friends, family or short term leases, so they can switch living at the house. I think this is a great short term solution for couples who get along well and respect each other’s boundaries.  This scenario will not likely work for the long term as most people ultimately want to have a place they can call their own home but if you can make it work – go for it.

7.       Have a friend or associate buy one half of your house.

This could work in two ways. The first is that they buy it so they can move in either in the basement or simply sharing the entire house.  You could sell one half your houses or simply a portion of it depending again on the living arrangements.  The other option is to sell one half to someone who wants the rental income. You could sell them one and then pay them rent on that half.  This might be a win for them as they have an automatic very secure tenant.  It could be a win for you as you would get the capital to pay your spouse out.  The downside is you would have to pay some rent to the half owner and that will increase your monthly expenses.  

For lots more information and tips read “Clean Break”