Divorce is one of the most emotional and stressful times anyone can endure in life. The emotional and financial repercussions can be hard to deal with even in an amicable situation, and usually one of the largest decisions to be made is… “What to do with the house?”
This is a huge decision to come to terms with for everyone involved. For those couples with children, the home is full of memories, friends, social habits and school regimens that are hard to let go of… In this case, some couples decide on a ‘buyout’ in order to maintain a sense of home security for the kids. This can best be explained as an ‘agreement’, in which one person remains in possession of the home, but proceeds with refinancing in their own name and using their own credit abilities. This process allows for the removal of the other spouse from any financial obligation to the home.
A buyout can also be a good option if there is a little to no equity in the home or resale prices are low. The most important issue here is the true value of the property and the financial ability of the individuals involved. Many couples are surprised to find that their individual credit may be far less than they expected, due to joint accounts, shared income, and credit cards that were issued in only one name.
After my own divorce, I discovered that even though I had four credit cards in my name, all of them were originally issued years ago in my husband’s name. My credit cards were secondarily issued under his original application. That meant that I actually had no credit record scoring of my own!
You may need to talk to a loan officer or mortgage broker regarding your credit or buying power before discussing a buyout. Getting your numbers and facts in order first, can make the process as smooth and easy as possible.
Unfortunately, not every divorce is amicable. More often than not, divorcing couples will end up selling the home to achieve a clean break. If selling is the decision agreed upon, here are some tips to help navigate the For Sale By Owner [FSBO] process during a divorce.
1. Get It In Writing.
As the For Sale By Owner [FSBO] selling process moves forward, and especially when the sale starts to look like a reality, for many it symbolizes a very real end to the relationship. Emotions come back into play. As a result, it’s extremely important that both parties come to terms with what constitutes an acceptable offer prior to putting the home on the market. Here are the main considerations this type of written agreement/contract should cover:
- Discuss how to determine the asking price. (We recommend using a Professional Appraiser)
- Come to terms with the “bottom line” offer, or the lowest price both parties are willing to accept.
- Determine which appliances & inclusions will be included in the sale.
- Determine dates of closing and possession.
2. Home Presentation.
If you can’t work together in a Private Sale, decide which person will deal with home showings and presentation. All FSBO homes must be clean, clutter-free and tastefully staged in order to get the best price possible. It’s not necessary to spend a ton of money to get a home in showing condition, but it does take significant effort to keep the home sparkling clean and ready to impress prospective buyers.
It may take a while to close a sale in today’s economy, and Private Sales are no different. It’s best to avoid emotion when negotiating the sale of your home. It’s very hard, but if you look at it as a business deal instead of the end of a marriage, it can really help. Arguments and tension can easily destroy a possible sale, so put the sale first, rather than giving in to your emotions.
Keep in mind that at no time should the FSBO buyer have knowledge of your personal situation. Knowing you are going through a divorce can harm your negotiating power, or even turn a buyer away from the sale altogether. Once you have an offer, the buyer will have little patience or understanding regarding your marital dispute.
Last minute regrets and emotional arguments have been known to cause one or both sellers to refuse to sign contracts at the last minute, or become impossible to reach to discuss offers. So I will once again reinforce tip #1… Get as much as possible in writing before you start the home selling process.
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