Gaining perspective from an experienced real estate agent.
The family home is unlike other financial assets and debts. A house is an illiquid asset, layered with emotion, that cannot be quickly cashed out and divided. It is often a couple’s most significant asset that houses their family and provides (and signifies) stability. In a divorce, the decision of what to do with the family home is often the most contentious issue to resolve. There are often complex financial considerations to untangle and strong feelings to address.
To better understand some of the issues that might arise with real estate issues in divorce, I spoke with Sally Messinger. Sally is a highly esteemed Realtor in Cleveland with over 41 years of experience. She has won many awards and has facilitated the purchase and sale of homes to a countless number of families throughout Northeast Ohio. She has enjoyed a remarkable career and has truly seen it all.
When it comes to real estate and divorce, Sally offered the following insights:
1. Don’t do it yourself – get the right team together: Sally emphasized the importance of getting the right professional team together when making decisions about your home in divorce. Your home is a significant asset and you do not want to go it alone and work from a handshake deal with your ex. When selling or buying a home, you should have a realtor you trust. In fact, consult with multiple realtors to ensure you are getting the best advice and the most realistic view of the market.
2. Be alert to market conditions: Deciding whether to sell the family home in conjunction with a divorce should be informed by market conditions. For instance, in a seller’s market, it can be a mixed bag: you may secure top dollar for the family home, but you and your ex will then have to purchase two new homes for each of you. Sally noted that – at the time of this writing in early 2022 – she continues to witnesss the hottest market she’s seen in her 41 years as a Realtor. The uptick in prices is due to a confluence of events: (1) relatively low interest rates; (2) a bullish stock market over the past few years; and (3) a pandemic which has caused more people to work from home. Also, due to demand and supply-chain issues, it is an especially difficult time to “add on” to your house with a renovation. Many people are opting to simply buy a new house rather than renovate their current home.
3. Account for reality today – don’t forecast into the future: Sally has seen examples where one divorced spouse agrees to sell the home in 12 months following a divorce. But then that spouse loses their job and it becomes problematic to sell when they’re not able to get a mortgage for a new home. She’s witnessed a number of external unforeseen events – from the real market grounding to a halt after the 9/11 terrorist attack and 2008 financial collapse; to this pandemic, which has caused an uptick in prices. Make sure your divorce settlement agreement makes sense for the realities today and does not leave significant contingencies for tomorrow.
4. Consider naming the Realtor in the Settlement Agreement: One of Sally’s clients elected to include Sally in the divorce settlement agreement as the chosen realtor to sell the family home. Her client recognized the risk that her ex-husband would have insisted on a less-qualified realtor as a form of retribution in “getting back” at her client.
5. Appraisals should reflect market trends; not just past sales: If you need your house appraised during a divorce, work with a realtor who can provide an accurate appraisal that accounts for market trends. House sales in the past 6 months may not reflect the trajectory of house prices in the coming 6 months. You want a realtor with on-the-ground, informed analysis.
6. Be careful how you sequence events: One of Sally’s clients found herself in the unfortunate circumstance of having purchased a new home around the time of divorce, then trying to sell the family home, all while paying spousal support and child support with three children. You want to think about timing and sequencing financial commitments so you are not overwhelmed with a press of obligations.
7. When refinancing, make sure your name is taken off the note: If your soon-to-be ex-spouse is trying to buy your interest in the family home, make sure your name is taken off the note when the house is refinanced. People forget, and it can be a real problem in which you are unable to buy your next home because you’re still on the old mortgage.
8. Beware of sabotage: Sally has seen cases where a divorcing couple agreed to sell the family home yet when it came time to sell, one spouse refused to release their “dower” interest in the home as a way to sabotage their ex. In one particularly dramatic instance, third-party buyers arrived with a moving van to what they understood to be their new home, only to discover that the sale was being held up by the seller’s bitter ex-spouse who refused to cooperate.
9. Don’t underestimate the emotional toll — this can be heart-wrenching: In observing her clients over several decades, Sally believes divorce can be more painful for some than when a spouse dies. Be mindful of the toll it can take and make sure to get the professional help you need.
Given the concerns that Sally raised, it is vitally important that a divorcing couple work with the right professionals to ensure their agreement regarding the family home is properly negotiated and buttoned up. Mediation provides an effective format to address the complexities and emotions surrounding a family home. At the conclusion of your divorce, you want an arrangement regarding real estate that you agreed to – not one that was decided for you by a judge.