The Marital Home: To Sell or Not to Sell (Part II)

Separating and divorcing couples enter into an arena in which they are faced daily with making decisions. Perhaps the most difficult, and even the most important, decision centers on structuring the family’s living arrangements. Clearly in 2021, the whole question of where to live has become more complicated by the developments in the housing market. Sale prices have escalated; inventory is low, resulting in a frenzy of buyers seeking to outbid their competitors. Naturally there is a corresponding development in the residential rental market, where rising prices and increased demand have caused some to consider renting less desirable units or moving to less expensive locations.

Our question focuses on the decision of whether the family, now needing two places to reside, should retain the marital home as a joint asset. Keeping the home is often tied to the parents’ wish to maintain stability and continuity for their children, at times even for themselves and, perhaps to a lesser extent, may be based on the expectation that the property will continue to rise in value.

In Part 1 of this discussion, we presented scenarios in which separating and divorcing couples made the decision not to sell their home. In Part 2 we will focus on couples that elect to sell the marital home.

Let’s consider Alice and David, a couple with two children, ages 10 and 12, living in a suburban community where the children attend school. This couple is faced with several dilemmas.

• Do they have to find another home in the same community in order to keep their children in the school system?
• Do they both have to live in the same community or at least nearby to simplify their co-parenting arrangement?
• How do they divide the equity in the house? For example does one keep the equity and buy a primary residence for the children and, if so, how is the other spouse compensated?

For this couple, the answer was to stay in the community. They did not want their children to experience a loss of friendships, community, and schools. In order to actualize their plan, Alice and David agreed that one of them would stay in the town, buying a home using the equity from the sale of the marital home and the other would buy or rent a home in another nearby town with a good school system. The focus on the schools was central to Alice and David’s decision-making. In the event that the current hometown high school did not meet either child’s educational or social needs, they, as parents, would have the option to enroll one child or both in a different school system. Of course, this opportunity was available only because the couple was planning on having joint physical custody, with the children staying approximately fifty percent of the time with each parent.

Alice and David had made a major decision but key questions had not yet been answered. Was there enough money to buy two homes and afford the mortgages on both, without feeling “house poor?” Which one of them would stay in the “hometown? Would the children prefer to stay with the parent who remained in the community? How would the equity in the house be shared? Would, for example, one of them receive a greater share in order to buy a home and the other parent rent a house or an apartment? And, if one parent received more of the house equity, would the other receive equivalent assets? If not:

• Would there be reimbursement in the future when the newly purchased house was sold?
• Would the couple need to agree on events and/or dates for the reimbursement?
• Would a delayed payment have an interest assessment or be tied to the increased value, if any, of the newly purchased house?
• Is reimbursement to be “packaged” in a different form? Could, for example, the parent receiving more of the equity also assume greater responsibility for some future liability such as the children’s college?
• Would additional equity, received at the time of divorce, be classified as a lump sum payment, credited, in whole or in part, toward an alimony obligation?

Whereas Alice and David made the choice for one parent to remain in the same community and for the other parent to relocate nearby, other couples decide to relocate. Often the decision has to do with the cost of housing. If the decision to sell the house was based on capitalizing on the inflated sale prices, the decision of where to buy may necessitate a move to an area with lower housing values. The couple is now faced with comparison of school districts in different towns, not to mention having to decide if they will both live in the same, or in different, communities. Alternatively some couples decide to rent, in a sense to let the “dust” settle before they make another major decision One spouse or both may be unsure where they want to live, what kind of residence they want to purchase (e.g., single family home, town house, condo, multi-family home), or even if they want to buy a home.

Decision-making at the time of divorce is by no means an easy task. Many factors and variables need to be considered and analyzed in a relatively short period of time. Mediation offers a process for helping couples to engage in creative problem solving, weighing the advantages and disadvantages of different options in order to reach a settlement that is in the family’s best interest. The generation of ideas is central to the mediation process, as is also the mediator’s facilitation of productive decision- making based on analysis of different options and variables.

Read Part I of this article series.