Separation & selling the family home

So you are separating. Your world is upside down. You’re nursing a broken heart and/or, at very least, some serious anxiety about what your future might look like.  Separation is a major trigger for resale and, due to this, I have been engaged to market properties for many separating couples over the years.   Here is an overview of your options as well as my top tips for couples who are contemplating selling the family home due to separation.

OPTION 1: Retain joint ownership for a period of time.

We occasionally see people opt for this option when:

• A separation is extremely amicable.
• There are children involved and parents want to ease the children into their new reality.
• When market prices have dropped or flattened since purchase, the resulting loss taking a big bite out of the families wealth which is just about to be divided into two.

Special considerations when taking this approach

Heightened emotions can be unpredictable during separation so this approach often does not end well unless a separation is very amicable. 

Think about yourself and your emotional makeup and think about your outgoing partner and theirs. What happens when one of you re-partners? What if you have tension around your children’s custody or support? What happens when someone's circumstances change and they want their money out to be invested elsewhere? A bearable situation can quickly become unbearable and it can be hard to get top dollar if you need to sell fast. 

Important note: If you are lucky enough to have an amicable split that makes this possible make sure to talk with your solicitor about documenting any agreed-upon review period and updating your Will in relation to the house. 

OPTION 2: Buy your ex out (or vice-versa)

This is normally my first suggestion to separating couples.

Why? Because it is the quickest and simplest solution. It can also save you money at a time when saving money is pretty important. 

It goes without saying that this approach will only work if you can communicate and try your best to deal with each other fairly. 

Here's how you would usually go about this process. 

Get an idea of what your home is worth. 

You could order an E-valuation (more on the QV E-valuer here) to get a very rough estimate. E-valuers are not always accurate so be aware of their limitations. What you are after at this stage though is an idea of value that won't cost the earth but will allow you to explore how much you might need to borrow. 

Find out if it's a financial possibility.

If you are buying your ex out will you need a mortgage? Could you manage the new mortgage repayments on your own? Use the mortgage calculator on your banks website to give you an idea. 

You can manage? Great. Would you be eligible for the finance required? Contact your bank or broker. I suggest dealing with a broker as, with Auckland prices, serviceability may be your biggest challenge and banks formulas for calculating ability to service vary. One banks 'no' may be another banks 'yes'. 

Use your estimated 'buy out' figure plus 10% just in case your E-valuation was ‘out’. If it’s looking good, arrange a pre-approval and you’re good to go. 

Agree on your final 'buy out' figure.

There is more than one way to do this and ultimately it is about the two of you reaching an agreement on a number. The fairest way to establish a ‘buy out’ figure is to each obtain a Registered Valuation and average the values to arrive at your magic number. Some couples calculate and deduct real estate fees as this is an expense that would have been incurred had you gone to open market. 

The reason I suggest a Registered Valuation rather than an agents appraisal is that it is harder to argue with. There is no conflict of interest (ie. an agent provides you with a complimentary appraisal because they hope to sell your property) and it also helps you avoid all the 'experts' (think everyone either of you know who lives in a house) who magically appear and tell you what you should be paying or should expect to be paid. Clean and simple. Nice. 

Get legal advice

Your solicitor/s will handle the specifics of your Relationship Property Separation Agreement, update your Wills and document and finalise your sale. 

Special considerations when taking this approach

While this approach is simple it can also be made complicated and drawn out because of the emotional upheaval and resulting power struggles that often accompany separation. 

Instead of negotiation with buyers on the open market why not negotiate with each other? Leave as much emotion as you can at the door and think about what you want, what your ex wants and try to negotiate a win-win. You both want to be ok in the future. One or both of you might be afraid of losing your foothold on the property ladder. If you have children they will likely be spending time at both homes so it's in both of your interests to be fair so that the children are ok. For there to be a winner there doesn’t have to be a loser. 

Is your ex driving you nuts? Are they being unreasonable and demanding? Acting like their perspective is the only one that matters? 

Take a deep breath and quantify what conceding some ground would mean for you. Do they want an extra $10,000? What would your real estate fees be if you sold on the open market with a reputable firm? How about moving costs? Would your share be more than $10,000? Sometimes it’s not a terrible idea to take one step backwards if it allows you to take ten steps forward. 

OPTION 3: Sell on the open market and split the difference

Well if you’re here it’s likely because Option #1 or #2 are not viable for you. 

To get the best result it is essential that you are both on board with selling and engaged in the process, otherwise, you may hit a snag when it is decision time and that will cost both of you. 

A few Do's and Don'ts...

DO choose an experienced, reputable agent with experience selling for separating couples.

Both of you should meet the agent, together or separately prior to engaging them. Or, if you have been tasked with selecting your agent, make sure your ex has the opportunity to have a meet and greet with the agent in person or on the phone before your campaign starts.

DO ask the agent to ensure you receive the same information at the same time.

Txt or email group achieves this easily. If you prefer phone calls or meetings ask them to call or meet with you both - separately or together. This eliminates Chinese whispers or resentment about one party having an information edge.

DO clearly instruct your agent to keep your reason selling confidential.

There is seldom any benefit to you of advertising your separation. You certainly don't want to signal 'fragility or need' to your buyers. 

DON'T sabotage your own sale.

If you are selling and splitting the difference every dollar matters. To both of you. Using the sale process to point score, refusing to communicate in a timely manner with each other when needed or dragging up relationship hurt when you do only serve to create financial hurt for both of you in the future. 

DON'T confuse yourself by listening to too many people.

Friends and family are invaluable in terms of support during separation and are genuinely well-meaning but can also get swept up in the emotion of the situation and, unless they are real estate experts, their advice to make sure you get ‘the right outcome’ can secure you exactly the opposite. Listen to the experts you have chosen and let them do their job. 

Note for when you need additional support.
Including trusted family members or friends in your meetings with your agent and/or sharing your reports and feedback with them may be reassuring for you while also giving your support team peace of mind that you are making the right decisions. If you need that extra back up, don't be too embarrassed to ask for it.

A Final Word...

If you are separating and this article has been helpful, why not share it with your ex? Sometimes it can help to have objective advice from a stranger who isn't a stranger to the situation you find yourself in. 

The best of luck with your decision making! And here's to happier days. 

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