Should I Keep the House? How to Think About the Marital Residence.

by | May 18, 2020 | Blog

The decision to keep the house is a big one.  The marital residence typically represents the majority of a family’s assets so buying your spouse out can use a significant portion of your share of the money from the marriage.  If you consider keeping the house, you need to look at it as if you were buying from a third party and make sure you understand the costs involved and the physical state of the house.

  • What are the costs?
    • Mortgage, Taxes Insurance – typically in the monthly payment
    • Utilities – Electric, Gas, Water, Sewer, Cable and Internet
    • Snow and Lawn care expenses
    • Condo Association fees
  • Need to consider the condition of the house and ongoing maintenance costs
    • Roof – how old and when will it need to be replaced?
    • Heating and cooling systems – are they in good shape?
    • Structural issues – how good are the windows & doors, garage doors is the porch about to fall apart?
    • Age and condition of Bathrooms and Kitchen – will these need to be updated to sell the home?
    • Can you do minor maintenance yourself or will you need to hire someone – makes a difference in managing the costs
  • If you keep the house the mortgage will likely need to be re-negotiated to remove one party.
    • Ask your mortgage company what will be required – get an idea if this will be doable for you. No point in trying to negotiate to keep the house if you cannot hold on to it.
    • If you need the alimony to qualify for the mortgage then you need to show a stable history of support payments for at least 3 months but perhaps up to 6 months, depends upon who your lender is. If this is the case make sure you negotiate the buyout to reflect the 3 to 6 month mortgage qualification period.
      • Can you start support payments before your actual divorce to facilitate obtaining a mortgage?
    • Can you get money from family – borrow from your parents or brother to buyout the mortgage?
      • Do you have sufficient funds not to have a mortgage taking it from other sources?
        • Sometimes you can borrow from your 401-K to invest in your home but check out the transactions costs on doing this – fees can be high to set up.

If keeping the house does not appear to be doable can you agree to defer the sale for a year or so until your youngest has graduated from high school?

  • Is there sufficient cash flow from the marriage to make this happen?
  • If you do decide to wait on the sale for the benefit of the children, who pays for the major items that might happen (eg. Furnace dies) during this period? – Where does the money come from and how are these funds repaid?
  • If you stay in the house the cleanup of the house for eventual sale will likely fall on your shoulders so be careful what you ask for.

If either a deferral or a buyout is not in the cards and you have to sell, negotiate the time frame for the sale.  It is best not to agree to a sale until you have a settlement or you could end up on the street with no funds to pay for a new home.  When it comes time to sell, if you do not have the co-operation of your spouse it will be a difficult process.  It is best to negotiate the specific terms and conditions of the sale.

  • Who will list the house – define the name of the realtor
    • Get the specifics of what the realtor wants; how many open houses, access for showings (what to do with the family pets and young children).
    • Listing date – set a date.
    • How will the marketing costs be paid?
      • Will you need a storage locker and who will pay for it?
      • If the house needs to be painted or repaired – Where will the cash come from?
    • If the initial listing price is too high negotiate how to reduce the price – when (90 days) and incremental time frames there after and by how much (5%) each time. When do you take the house off the market if it is not selling?
  • The more detail you have in your agreement the better prepared you will be in if the person sitting in the house refuses to co-operate and you need to go to court to enforce the marital settlement agreement.

The family home is an emotional asset for most folks in a divorce.  Make sure you get the professional advice you need before you make a decision this large.  Like everything else, the better prepared you are the better your decisions will be.