One of the greatest challenges facing a divorcing couple is coming to an agreement on what to do about the family home. With so much changing when a couple divorces, it’s not surprising that at least one of the spouses want to keep the family home for financial, continuity and emotional reasons, the most important of which is the impact on other family members. But, is keeping the family home really the best option?
A discussion between the divorcing couple on whether to keep the family house or sell it is often fraught with emotion and many couples have difficulty coming to an agreement. The decision to keep the home begs a lot of other decisions, – who should live in it, who will maintain it, who pays for it, – the list goes on and on and can lead to complications and a lot of conflict. What may help the couple make the best decision is to consult objective financial and tax experts so both parties can enter the negotiations with their eyes wide open.
If the divorcing couple cannot come to an agreement, they may find themselves in front of a judge who will decide for them. Sometimes the judge orders the family home to be sold leaving the person living in the home scrambling to find a place to live for themselves and any other family members still living with them. It is very difficult to make good life decisions under such circumstances. For the best possible outcome for everyone concerned, the couple should make every attempt to come to an agreement about the family home before are faced with complying with a court order that neither is happy with.
If you are faced with the decision about whether to keep or sell the family home due to divorce, here are 5 questions to ask that can help you decide:
- Can you afford to sell your home? Do you have enough equity in your home to pay for the sale and your moving expenses? To get an idea of what your home will fetch on the market, engage a real estate agent to prepare a comparative analysis of recent sales in your neighborhood. Most agents offer this service for free. Or consider hiring a licensed appraiser if you prefer to an official appraisal of your home’s value. If you do not have enough equity, do you have enough cash reserves to pay for the cost of the sale and your moving expenses. If you find you owe more on your home than what it is worth you may want to consult with a short sale expert to see if that would be a good option for you and your family.
- Can you afford to keep your home? Deliberating over this can painful with so much at stake. No matter how much you may want to stay in the home, your financial situation will likely become much tighter following the divorce. Although not necessary to do so, would you qualify for a refinance with just your income? Refinancing could lower your monthly payment. Create a budget that includes current and future home repairs, maintenance, property taxes, insurance, utilities, etc. Will you have enough money left over to start your new life? Perhaps you want to let you spouse keep the home. One thing you should be aware of is if your name is on the mortgage it will remain on the mortgage after you deed the house over to your spouse. The only way to get your name removed from the mortgage is to require your spouse to refinance the home in their name. Keeping your name on the mortgage while removing it from the deed can put your credit at risk while you have no legal right to safeguard the property.
- Is renting a home a better option? Can you lower your housing costs if you find a suitable rental? If you have school aged children, will you be able to stay in the same school district minimizing the impact on them? Research the rental market in your area. A tight rental market, such as the current one in the Jupiter area, means more competition and higher rents. Searching of a suitable rental in a tight market could pile on more stress so give yourself plenty of time for the research. And make sure you can provide all the necessary documentation to the prospective landlord to assure them that you would be an outstanding tenant.
- Could you be better off taking other assets in exchange for your share of the family home? If you decide to keep the house now and later sell it on your own, you could end up with a hefty capital gains tax bill depending on how much your home sells for at that later time. Meet with a tax accountant or Certified Divorce Financial Analyst (CDFA) to figure out the various tax consequences that could result from selling or trading both assets and liabilities during divorce.
- Would it be more beneficial for both parties to sell the home and make a new start? If the sale of your home would reap a profit you can use your share to launch your new life basically unencumbered by a home that has a lot of emotional baggage attached to it. You won’t find yourself in an upsetting flashback in the kitchen while preparing a holiday dinner. And you won’t be have to experience the pain of watching your former spouse set up housekeeping in the home you had previously shared together. Once you’re out from under the weighty constraints of that mortgage and any pending repairs, you will be free to find a home more suitable to your new life and budget.
If you are in Jupiter-Tequesta-Palm Beach Gardens area and would like a complimentary comparative analysis prepared for you please contact me at 561-809-6746.