If you should find yourself in a divorce situation or needing to divest the property of a deceased family member, it can be a bumpy ride, even though it shouldn't be. Here are a few points to consider if you find yourself in such a situation:
- I had clients whose mother had passed and left the family her house. As with all transactions, my goal was to sell the house for the most the market would pay. To get to that point, the family had to agree upon a realistic listing price for the condition the house was in. This took some doing because several of the family members lived in other states and thought that they knew what the property should sell for. Although it might be best to have an appraisal done to determine value, you should know that appraisals determine value based upon past sales - going back as far as a year. Since the market is always changing, it is just as wise to have a REALTOR®'s opinion of value.
- Market value is usually stated as a gross figure and does not take into account sale's or transfer of ownership expenses. These should be taken into account before "splitting the proceeds" between the divorcing couple or among inheritors.
- Prior to selling an estate, be sure you have a court-approved right to sell. Your estate attorney should procure this for you.
- Prior to listing the property for sale, family members should already have decided upon how the proceeds are to be split and to whom paid. All parties should agree in advance as to what "costs of sale" are to be deducted from the total proceeds at closing or which might be paid separately by whomever. You should have a letter signed by all parties so stating and given to your attorney so funds can be distributed quickly and efficiently upon closing.
- If there is a mortgage on the house, learn what its ramifications have on you. If there is a reverse home equity mortgage in place, they usually give you perhaps 6 months to pay the mortgage off. On the other hand, if it's a purchase-money mortgage with a due-on-sale clause, they will want to be paid right away. However, it takes time to foreclose which means you have time to re-finance or sell.
- If multiple parties are concerned with different ideas, there's usually an amicable solution available. For example, if one wants to keep the home but the other wants to sell, options include an immediate buyout by the one wanting to retain the property (a short or long-term promissory note might be held by the party wishing to sell while the buying party gets finances in order to take out a new loan); or, perhaps renting the property short-term or long-term is wiser for both with everyone splitting the rental income each month. Worst case scenario, a court can order the sale of the property and the proceeds split among the parties.
Each option comes with certain costs, including:
- Selling - Listing, staging and closing costs
- Renting - Property management and maintenance costs
- Not Selling/Moving in - Maintenance and HOA fees
** Each option discussed also comes with potential state, federal and capital gains taxes. To this end, you might want to find a trusted estate planning attorney.