By Ilan Joseph, Broker, ABR®, e-PRO®, AMP® | © All rights reserved
The thought of selling your matrimonial home might be the last thing you want to think about when going through a divorce. It’s a reality real estate agents who specialize in divorce sales know all too well but there is a silver lining – you have options and selling isn’t the only one.
No one enters a marriage thinking it will end in divorce. However, approximately 40% of all marriages in Canada lead to a divorce. The home you shared is likely to be your largest joint asset, so you may be weighing the pros and cons of selling or keeping your home in a divorce. There are many factors to consider, both financial and sentimental, the most pertinent of which are covered below. Read through these basics and reach out if you have any additional questions when selling your home in a divorce.
What Are Your Options?
Many couples work with a divorce team, which often includes any combination of a financial advisor, mediator, divorce lawyer, real estate lawyer, and real estate agent who specializes in divorce-related home sales. Every couple is unique. Some want to sell so that both parties can start fresh, some want to stay as to not disrupt the kids, and sometimes both parties want to keep the home. Worst case scenario, one person is more interested in taking as much as they can for themselves. To protect your assets and legal rights, working with a divorce team is best.
In some cases, the financial pros and cons surpass the personal or emotional decision. For example, a mom may want to keep the home as to not disrupt the kid’s routine. However, your financial advisor may urge you to consider the quality of life and benefits of downsizing. While staying in the home may minimize change, it may spread the family too thin from a financial downside.
You have many options to explore, including:
- One spouse buys out the other at an agreed upon price and keeps the home. This buyout is sometimes setup on a repayment plan.
- One spouse remains in the home for an agreed upon timeframe prior to selling; often when the youngest child graduates from high school. How the monthly mortgage is paid will be agreed upon during mediation.
- The house is sold prior to or after the divorce and the equity is split in an agreed upon amount.
- One spouse refinances the home and takes on a new mortgage in their name, removing liability from their current spouse—and often buying them out.
- The home is kept as an investment property managed by an impartial property manager; and the profits split at an agreed upon rate—or used to pay the mortgage off sooner rather than later. This solution can be beneficial if there is not much equity in the home yet.
Regardless of the decision, equity is not always split 50/50. For example, if a family inheritance was applied to the loan, one spouse may have a legal right to more equity than the other. This is why it is best to work with a team of divorce specialists to determine the equity percentage, as well as the entire financial portfolio. Whatever the decision is, your spouse cannot make the decision to keep or sell the home without your consent. If you cannot come to an agreement amongst yourself, the court will make the decision on your behalf.
What If The Home Was Purchased Prior To Marriage?
The options above are in regard to homes that are community property purchased after the couple is married. However, if a home was purchased by one of the two parties prior to marriage then options vary greatly.
- If the spouse who originally purchased the home has continued to make the monthly mortgage payments or has paid the home in full—the home may still be considered their sole separate property.
- If the mortgage is being paid jointly, sale profits maybe partial community property—or the mortgage holder may need to reimburse their spouse for the amount they have contributed.
- If the home has been refinanced in both names, or if your husband or wife was added to the deed before or after marriage, the home is now community property. Even if community property, the amount both parties have invested to-date and up until the time of the separation may affect how the equity is split.
What If You Never Married?
If you and your partner never married you may not benefit from the sale of the home, unless your name has been added to the title. Even if you have contributed to the monthly mortgage payment or ongoing household maintenance, repairs, and expenses—it will may be seen essentially as rent. If you have been together long enough to constitute a common law relationship (which varies from one province to the next but is currently 3 years in Ontario) then you may have some financial rights to equity in the home. Best case scenario is that you broach this topic prior to moving into a home with someone if it is not yet paid in full. Preferably speak with a legal or financial advisor and put your agreement in writing.
If You Are Going To Sell Strongly Consider Doing So Before You Divorce
If you are going to sell it is financially beneficial to do so before the divorce is processed. This is not to rush the process, but to take advantage of the tax benefits. The current capital tax gain law states that if you are married and selling the primary residence you and your spouse have lived in for at least two of the last five years, you can exclude $500,000 in profit. If you wait to sell until after you are divorced, this drops down to $250,000. This is one of the many reasons to talk the advantages through with a financial advisor before you make any major financial decisions.
Second homes and real estate investment properties are subject to different tax laws as outlined in the Family Law Act. However, you, your spouse, and financial advisor may agree that waiting to sell is the best options. For example, to keep the kids in their family home for a few more years—or if there isn’t much equity in the home yet.
Securing A Property Assessment
Whether you decide to sell or decide that one of you will keep the home—it is a good idea to have your home appraised. If you have additional real estate, have those appraised, as well. Depending on your needs, a bank appraisal may be required. Bank appraisals during a divorce are often on the conservative side of the scale. If one of the two of you will be keeping the home under a new and individual mortgage you will certainly need an appraisal.
An alternative to an appraisal is an assessment and market analysis completed by a local real estate agent. This professional evaluation will be compiled in a formal letter, and provide a sales estimate based on the current market trends.
If an assessment is not sought out the divorcing couple will need to wait until an offer is accepted.
Working With A Real Estate Agent Who Specializes In Divorce Sales Is A Must
If your decision is to sell your shared home (either before or after your divorce), sell your secondary properties, or to co-own property as a rental source of income—working with a real estate agent who specializes in divorce sales is a must. Not only am I a tenured negotiator who understands the need for both a quick and profitable sale—but I am happy to meet with you and your spouse or ex-partner individually, as an impartial member of your divorce team. If you prefer, I can work as a liaison between you and your divorce/real estate lawyer, mediator, and financial advisor. If needed, I can also refer you to local divorce partners to complete or build your divorce team. In fact, I advise that you speak with at least one or two financial and legal experts before you decide if selling is your best option.
The options are yours and I am certainly happy to meet with you to assess your home, or get started staging and marketing your home for sale. If you decide to keep any of your properties as rentals, I can function as your impartial property manager—taking the stress of ongoing communication with your ex off your plate, as well as the stress of being a landlord. Even if your marriage dissolved amicably, becoming a landlord is a major commitment. I will ensure you are in compliance with all local landlord/tenant laws. I have a long list of reliable contractors and service providers to complete required repairs, inspections, and maintenance. I will even provide the marketing and prescreening required to get your home or property rented to a responsible tenant.
Even if you have sold a home in the past, selling a home as part of a divorce has a long list of additional factors that you must take into consideration. I am here to help guide you through the process and will remain impartial—yet compassionate to all parties involved. Reach out today if you are in need of a real estate agent in Ontario who specializes in divorce related property matters.
On a personal and professional note, I’ve seen couples put their anger with one another ahead of the wellbeing of their children and this has made life for everyone much more difficult than it should be. The costs of an average divorce could run from $5000 to $100,000 and thats largely to do with the way both parties move ahead with the divorce. This anger and eventual waste of money does affect your children in a number of ways, which I encourage you to consider in order that you alleviate the consequences of your divorce on them.
|CHILDREN & DIVORCE|
|SOURCE: Anne-Marie Ambert, “Divorce: Facts, Causes and Consequences,” 2009|
|Estimated Canadian children affected by divorce||– 35%|
|Children living in one-parent families, headed by a female parent, who live in poverty||– 22%|
|Couples who tell their children they are separating and how life will be different||– 5%|
|Likelihood that children will be at risk of falling into low income after separation and divorce||– Odds increase by a factor of 11 http://www.statcan.gc.ca/pub/11f0019m/11f0019m1999132-eng.pdf|
|Main sources of negative outcome for children||– Significant reduction in financial resources
– Diminished parenting
– Parental conflict
– Exacerbation of pre-existing problems
|Problems experienced by kids of divorced couples||– More alcohol and marijuana use
– More problems with peers, authority figures
– Children are less likely to marry and more likely to divorce.
|Anxiety, depression and self-esteem issues of children from divorced couples||– Twice the rate of married family children|
|Dropout rate of kids from divorced couples||– 2 to 3 times the rate of married family children|
The lawyers at Galbraith Family Law have extensive knowledge and understanding in all aspects of family law, including matters relating to your real estate assets. They specialise in divorce and family law and I would recommend seeking legal assistance on such matters:
Brian G. Galbraith, B.A., LL.B., LL.M, Acc.F.M.
Galbraith Family Law Professional Corporation
Phone: (289) 803-3327
This Page Answers Frequently Asked Questions About Selling a Home in a Divorce, Such As:
· What happens to the matrimonial home in a divorce
· Who gets the house in a divorce
· How is property divided in a divorce
· How to buy out spouse’s share of the home
· How to keep your house in a divorce
· Whether to sell a house before or after a divorce agreement
· Information and options about selling your home in a divorce for Ontario
Ilan Joseph is a Real Estate Broker with Sutton Group and is co-founder of a 10-person award-winning Toronto, Thornhill and Vaughan real estate team. Since 2002, Ilan has been privileged to advise and service thousands of buyers and sellers, enabling them to reach their real estate goals.
Ilan is often called upon by the media when covering Toronto’s real estate market and can be found on LinkedIn, Instagram, YouTube and Facebook.