Not every real estate story is a happy one, unfortunately. And while many people would rather scroll through photos of fantasy homes with infinity pools, or read about “tips for first-time buyers,” there are also countless individuals out there that need help navigating a separation or divorce while owning real estate.
That’s where we come in.
We don’t work in fantasy, but rather market realities. And the reality is: the word “divorce” is synonymous with real estate. In fact, there’s an old real estate adage about “the five d’s,” which is even more accurate in today’s market than ever:
Diamonds, Diapers, Divorce, Downsizing & Death
These are moments in life that drive people to make major changes in their real estate position, whether buying, selling, or doing both. And divorce is a big one, based on our experience in the real estate business.
Unfortunately, or fortunately, for many folks that ended up happier down the line, we see a lot of this. It’s not at all uncommon for a past-client to call us and say, “Hey, so it turns out that Bobby and I are separating, which is totally cool, but we need your help as we decide what to do with the condo.”
At the time of writing this post, I currently have three active sets of past clients that are sorting out their marital status and real estate holdings. That is to say, they’re all splitting up, but they don’t know how to do that.
Keep reading these selling posts next:
- Selling Your Home in a Changing Market
- Why Your Home Isn’t Selling
- Should You Renovate Your Home Before Selling
But let’s start from the beginning.
Let’s say that you and your partner own a house or condo and you’re splitting up. Right off the bat, there’s a question to ask:
Should one of us attempt to keep the property?
This is easier said than done for most people. In Toronto, where the current value of a home is usually higher than what somebody paid, and where most people take out mortgages of 60% or more, in order for one party to keep the home, the other party would have to buy the first party out.
Let’s say that Bobby and Jane purchased a house for $1,000,000 in 2017. And let’s say that they made a 20% down payment at the time, thus they obtained an $800,000 mortgage. Now, let’s say that this house is worth $1,350,000 today, and that there’s $700,000 left on the mortgage.
In order for Bobby to buy out Jane, or vice versa, Bobby would need to come up with half of the $1,350,000 value, or $675,000. In cash.
Considering Bobby and Jane only made a 20% down payment in 2017, it’s probably going to be really tough for Bobby to come up with $675,000 today.
And even if Bobby did come up with $675,000 today, he would then have to remove Jane’s name from the mortgage and qualify for a new mortgage alone.
Pricing your home for sale is a critical step, read our post about pricing right here.
I have seen couples try all kinds of things in attempts to keep the home. I’ve seen parents get involved and provide a cash infusion, I’ve seen separation agreements written that allow Bobby to move to Orillia and buy a home, while Jane stays in the house – but it remains in both their names. If you can dream it up, I’ve seen it.
And that’s both a blessing and a curse.
When separating or divorcing, a couple can essentially agree to anything. While they’re likely each going to have legal counsel or a mediator present, they and they alone are the ones that will decide how to move forward.
I’ve seen cases where a couple wants to keep the matrimonial home, but get divorced, often because of a child or children. So imagine a couple who gets divorced but remains on title to the property together – and remain on the mortgage, together as well?
It happens. And it will continue to happen as long as couples decide that keeping the matrimonial home is the most important part of the divorce or separation.
I’m no marriage counselor, but in these cases, I often ask the couple to look two, five, or ten years down the road, and consider how being legally divorced but financially attached could affect their lives, and the lives of – dare I say, new significant others?
But I’m out of my league now, right? I’m but a mere real estate broker! Except that we come across these situations again and again.
Truth be told, and despite the preceding, most couples can’t afford to keep the property in which they live together, and many others simply don’t want to.
How much work is it really to sell a home in Toronto? Read our post right here to find out.
So, what’s the best way to sell a home during a divorce or separation?
The phrase “it depends” is probably warranted here, since some divorces are more amicable than others. Not only that, if a couple is looking at the real estate agent who sold them the house or condo to begin with, the first disagreement might come if one party was closer to that real estate agent than the other.
I’ve seen this before. I’ve witnessed it. And while I see no way that I could “favour” the wife over the husband, or the husband over the wife, when I’m selling the house that they both own, sometimes, one party just wants a fresh face and a new start.
Download our Seller’s Guide for a full breakdown of what it’s really like to sell your home right here.
A couple should consider if they want their original real estate agent to handle the sale at the onset, but often the lawyers will get involved and tell the couple that they each need to pick an agent, or even worse – multiple agents, and have each provide a valuation.
I’ve always felt that if the property is being sold, and one party isn’t buying the other out, then this isn’t necessary. But depending on if the divorce is amicable or not, and what the divorce or separation agreement says, this could be the case.
In terms of the actual sale process, I always advise that decisions are made in advance of listing the property for sale, and not during. This aims to eliminate disagreements made based on emotion or situation.
I also advise that neither party lives in the house during the sale, which is fine, considering we advise all of our seller-clients not to live in the house during the sale! Perhaps a topic for another day, but we believe in order to maximize the sale potential of a house, personal effects should be packed, moved, and stored, then there should be repairs on the home, painting, cleaning, staging, and the listing.
For a couple who is separated or in the process of a divorce, this can kill two birds with one stone. Since both parties are ultimately moving out of the home, packing/moving in advance will make the process easier down the line, and help declutter the home and prepare for staging.
By not living in the house during the sale, it allows buyers unfettered access to the property, ensures the property shows its best, and ensures the property owners don’t get emotional or disagree over who stays where, and when, and for how long.
As for the “decisions” to be made in advance, I’m talking about things like agreeing on a desired closing date, agreeing on what items are sold with the home, ie. fixtures, furniture, etc., as well as the target price or price range.
When emotions run hot, they often cloud the decision-making process, and sometimes even work against the couple’s best interests.
In the end, both parties need to sign the Agreement of Purchase & Sale for an offer to be accepted, so we advise couples to do whatever they can ahead of time to ensure they’ll agree on terms and conditions when the opportunity to sell is presented.
Like it or not, divorces are a part of life. They’re also a large part of the real estate world, and we see them so often that it never phases us. When dealing with property sellers who are separating, we always ensure discretion, professionalism, and confidentiality.
For more information on our sale process and staging process, here are a couple of helpful links:
Looking for home selling advice? We’re ready to help. Reach out at any time by calling 416.642.2660 or emailing admin@torontorealtygroup.com. We’re always happy to chat!
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