Divorce: Who Gets the House?

“The question isn't simply, ‘Who gets the house?’ The more important question may be, ‘Does keeping the house make financial sense?’

Divorce in our society is very commonplace. We all know of someone that has been divorced or is getting divorced. However, the statistics don’t describe how it feels when it happens to you. If you have been through a divorce, then you know firsthand that the decision to legally end your relationship is often a highly emotional one. On top of family and social pressures comes the difficult tasks of trying to divide assets that are co-owned and separate your financial obligations that may have been intertwined for years, and in some cases decades.  It’s no walk in the park. The family home is typically one of the largest financial assets and the decisions surrounding the property can become difficult and at times contentious.  In my experience, over the years, what I have found is that many couples don’t really know where to start. Typically, the moment a spouse decides the marriage is over, one of the first calls would be to their attorney.  Truly the role of the attorney is very important to help the parties navigate through the many details that need to be addressed, especially if children and real property are involved. The next call should be to their Real Estate Broker. The role of the real estate agent in my opinion is just as important. The agent typically will be in constant contact with both parties, be involved with the initial valuation process all the way through to the successful sale and closing of escrow. Agents are the ones that will get the parties to understand the current value of the home, determine what cosmetic improvements would be needed to improve the value, the approximate costs and calibrate the time needed to make the repairs, prepare the home for marketing, but more importantly help determine the net proceeds each party could walk away with.

For couples considering a Divorce, the local Peninsula real estate market can present both opportunities and challenges.   Buyers in our area are sophisticated, well qualified, well informed and willing to pay a premium for properties that are turnkey. In contrast, properties that need repairs, or don’t have great street appeal, could take longer to sell or may sell for less than anticipated. This is why I firmly believe that one of the first steps that the parties should make is obtaining a meaningful market analysis of the property, to demonstrate the difference (pros and cons) between performing cosmetic improvements, or simply selling “as-is”.     Helping parties review and comprehend reliable market data will bring clarity to an already emotional and sometimes volatile topic. Having a coherent understanding of how real numbers will affect their desired outcomes, will help them and their attorneys make informed decisions.   The goal should be to make decisions based on the condition and market value of the property and not based on the emotional attachment either spouse may have to the property. There are several factors to consider when the decision to sell the family home comes into play, the two I believe that are the most important are affordability and timing.  Trying to “win” the family house in a divorce negotiation can potentially be the wrong move financially. 

For example, I worked on a transaction, where one spouse was adamant about retaining ownership of the family home.  I recommended the parties obtain several professional property inspections such as pest, general home, foundation and roof so that the parties could better appreciate the homes’ actual condition. These inspections revealed substantial deferred maintenance issues with significant and expensive imminent repairs needed. These defects in my opinion substantially affected the property's resale value and the disadvantages of keeping it. Once the parties understood the condition of the home and the anticipated repair costs, obviously, their perspectives changed. Simply stated, it made no sense to try to stay in the home. Instead of looking at the home as a “prize” to be fought over and won, the parties came to view the home for what it was; a financial asset that needed to be evaluated objectively as part of their overall financial picture.

In the end, the property inspection reports helped my clients make a practical decision. Ultimately, choosing not to litigate over who would keep the home, saved them thousands of dollars in attorney fees, avoiding an unnecessary dispute over an asset that, after closer examination, neither party considered financially advantageous to retain.