The House, The Finances and Divorce

There is so much to talk about surrounding divorce- but an interesting concept many of my clients have brought up “Marriage is about love and Divorce is about dollars and cents”.

Options for the House

That tends to lead into a conversation about the house. In this article we will talk about options for the house, financial considerations for keeping the house, and the value of working with an experienced professional.

There is so much to talk about out surrounding the house and options. To simplify for this article: you can sell it now, defer the sale until a later point in time, or one party keeps the house.

If you choose to sell the home now make sure details are discussed and agreed upon up front. Specifically

• A schedule for showings
• Who is getting what contents in the home and a schedule for removing those contents
• What cleaning service, landscaper, and repairmen will be hired and when will they arrive
• How each party wants the Realtor to communicate updates

Deferring the sale until a later point in time can be an interesting conversation- typically it comes up when kids are in the home and the time frame is less than 4 years. There are many things to think about, agree on and have in writing when considering this option.

Here are a few:

• Who is responsible for mortgage payments
• Consider creating a detailed and enforceable agreement in how repairs, taxes, and other details will be paid
• What are the end dates and how will the equity value be divided upon sale?

The last option is if one spouse chooses to keep the house. The first step is to determine the value of the house, then consider all of the other assets involved (investments, other rental properties, business assets) and one spouse will buy out the other. Let’s chat about this option more in the next section.

Financial Considerations for Keeping the House

The biggest questions to consider in this section is “Can I really afford to keep the house?” And “What am I willing to give up in order to keep the house?” The reason I highlight these questions is they are very important to consider with regards to your financial picture right now and then down the road.

The first step is to figure out the value of your property- there are a variety methods do this.

The least accurate (also the cheapest) is to go to a website like Zillow or Trulia. Tax records are another consideration but also may not show the true market value. The most expensive and significantly more accurate method is to get a formal appraisal by a licensed appraiser- just be aware that if you need to get a new mortgage or home equity line of credit the lender is required by law to use their own appraisal.

Another option is to get a Broker Price Opinion from a real estate agent. Be aware that not all real estate agents are the same on this- are you getting a 5 sentence statement or a multiple page document that explains how the price was determined? Will the real estate agent testify to the Broker Price Opinion in court? Consider interviewing several real estate agents and looking for designations like Certified Divorce Real Estate Expert or Certified Divorce Specialist.

An important thing to think about after determining the value of the house- is what do the rest of your assets look like- how does the value of the house compare to the value of other items?

Would you need to get a loan to buy out your spouse? Before you consider anything else- get on the phone with a Lending Professional to chat about what you can qualify for and what options are available.

What assets are you willing to give up in order to keep the house? When answering the question, I strongly encourage you to think about what your life will look like- for example:

• How am I accessing cash if there is an emergency?
• Does this affect my retirement?
• What would my lifestyle realistically look like?

Actually, let’s focus on that last question a little more- because being “house poor” issomething people mention for a reason. Consider walking through what your cash flowwould look like (are you able to comfortably keep up the latte habit?) and emergencyfunds to handle necessary repairs that come up (how old is that hot water heaterexactly?).

The Value of Working with an Experienced Professional

For the figures that are typically tossed around home valuations this is an area where you want to utilize experienced professionals. Consider working with people who have specialized experience and knowledge to divorce. As a Certified Divorce Financial Analyst (CDFA) I work with clients all the time regarding the very important questions around “Can I keep the house?” And “What do my options actually look like right now, in the near term and later?”

Certified Divorce Lending Professionals (CDLP) and Certified Divorce Real Estate Experts (CDRE) have a great deal of experience in divorce and can contribute a great deal towards seeking an outcome with optimal results.

Divorce can be complicated- you don’t have to go through it alone.

All right- maybe we would benefit from a deep breath in and a big breath out. We talked about a lot! Remember- you have options for the house, there are important considerations from a financial perspective, and there are great reasons to utilize an experience professional with relevant experience.

Brianna Beski is a financial advisor and CDFA at Raymond James, based in Colorado. She and her team focuses on helping people have confidence in their financial futures. For the rest of the story, please visit her website or email her at brianna.beski@raymondjames.com.

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJA, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brianna Beski of Raymond James Branch 3BA and not necessarily those of Raymond James or Raymond James Financial Services.

Raymond James & Associates, Inc., member New York Stock Exchange/SIPC