Selling your Seattle home while going through a divorce
Divorce is difficult. Divorce and having to sell your home as well is extremely stressful. Here's some advice that will help you decide the best path to follow based on your personal situation.
The sale of a family home is a common issue in divorce, especially the question of when to sell. Often the sale will take place after the divorce is final, in which case divorce attorneys draft specific provisions in the final settlement as to how expenses of the sale, as well as the proceeds, are to be divided. The provisions may also address matters such as occupancy of the home prior to sale, etc.
Sometimes, there is an agreement that the sale will occur at some later time -- such as when the children are grown. In these cases, one party may be granted ownership of the home and the other spouse is given a lien for an amount they are to receive out of the eventual sale. This arrangement raises the related issue of whether the person granted ownership will also be required to, or even has the ability to, refinance the mortgage into their sole name.
On rare occasions, the parties will agree to remain co-owners, but that option requires a high degree of ongoing cooperation (and they are divorcing after all).
On the other hand, many couples prefer to sell their existing Seattle home prior to their divorce being final. This requires the agreement and cooperation of both. If one person were to ask the court to order the sale prior to final orders, the courts tend to be very reluctant to require such a sale until the rest of the divorce issues have been decided. In other words, without an agreement to sell, you will probably have to wait.
Dividing the Proceeds After the Home is Sold.
Under Washington law, property and debt acquired during the marriage (other than by gift or inheritance), is the property or debt of the couple, i.e. the community, rather than being the individual property or debt of either spouse.
Even if the home is titled in the name of one party, such as when that person owned it prior to the marriage, the other partner may have acquired some community interest during the marriage through community funds being invested into the home. This means that the courts will generally want any issues of community interest decided prior to entering a contested order allowing sale (as opposed to agreed orders which the court will almost always sign).
When a couple agrees to sell their family home prior to the divorce being final, they also need to agree on what will be done with any proceeds pending final resolution of the terms of the divorce. Most commonly they agree to place the funds in trust through one of their attorneys, to be held until a final settlement is reached and the funds can be disbursed according to the terms of the settlement.
It’s worth mentioning that the home sale may be connected to other divorce funds. The division of house funds often depends on the division of other assets. Here, house funds are used to balance the overall division of property and assets.
For instance, if both parties agree to keep their own retirement plans, but one is worth $200,000 while the other is worth $400,000, the house proceeds might be divided $300,000/$100,000 so that each person ends up with $500,000. Also, in some cases, such as where the incomes of the parties are significantly different, it may be appropriate under Washington law to divide assets by some percentage other than 50/50.
As such, there is not a hard-set rule for the division of the home sale. As every couple’s financial situation is unique, the court will consider what is fair. Note that the expenses involved with selling your home will have to be taken into consideration.
Related Financial Matters the Divorcing Couple Needs to Consider.
A related issue when selling a home during a divorce is where each person will be moving to. Some people may choose to find short term rental housing until after the divorce is over and they have received their share of house proceeds and other assets.
For people who may wish to purchase new homes prior to the divorce being final, there are additional issues to consider. Lenders are very often reluctant to finance a home purchase during the divorce because they do not know what the financial position of the borrower will be coming out of the divorce. In the middle of the divorce, it is uncertain whether there may be spousal support obligations increasing or decreasing the borrower’s income, or what assets and debts will be assigned to them.
If you are trying to obtain financing during a divorce, it can be very helpful to find a mortgage broker who is specifically familiar with divorce issues, as they may know lenders who will be willing to work with you, or what extra steps lenders might require to finance in such a situation. You may want to seek the broker’s advice prior to filing the divorce action.
The Collaborative Divorce Process Can Be Applied to the Home Sale.
To try and avoid these issues, some couples choose to complete new purchases before they have filed for divorce.
A good option for couples who need to work out agreements prior to filing for divorce is the Collaborative Divorce process. Collaboration involves working through the divorce issues cooperatively to reach agreements outside of going to court. Typically in a collaborative divorce, the attorneys do not file the divorce action with the court until we have completed a settlement agreement. The only role of the court is to sign the agreed final orders.
In a collaborative divorce both parties will have an attorney who is also working cooperatively with the spouse’s attorney. Both parties agree not to go to court or threaten to go to court, which helps to limit conflict and increase cooperation. Since each party knows that reaching an agreement that meets their needs means also making sure the agreement meets the needs of their spouse, there is a strong incentive to work together to find mutually beneficial solutions.
In a collaborative process there is generally a financial specialist who assists the parties in evaluating their finances and making smart decisions about how best to leverage those resources to achieve the optimal outcomes for both spouses. If needed, the professional team may be able to refer the couple to mortgage brokers who are familiar with divorce issues and who may even be specifically trained in collaborative work.
Mediation is a Similar Option to Collaboration.
Another option for couples seeking to work out agreements prior to filing for divorce is mediation, where the couple works primarily with a single mediator. This can be an option for couples who desire less professional support in working out their settlement. The mediation can be a one-time process where the couples sign an agreement at the end, or it may involve several meetings to work through all the issues.
So, What is the Best Option for When to Sell your Seattle Home During a Divorce?
Overall, there is no right or wrong answer as to when to sell the home. There are plenty of options that can fit how acrimonious or harmonious the divorcing couple’s relationship is. As divorce attorneys, however, we do encourage couples to at least consider speaking with an attorney before taking any formal steps.
Sometimes, the decision is easier when you hear the options that best suit your situation, and you’re given a chance to mull over the decision while a professional is readily available to answer your questions.
This article was written by Mike Fancher who is the managing attorney at Seattle Divorce Services, a law firm focusing on the use of innovative methods for resolving divorce disputes as peacefully as possible. Mike has served on the Board of the International Academy of Collaborative Professionals and is a frequent blogger on the Seattle Divorce Services website.