Divorce is never easy. Emotions run high, and decisions about property and assets can be overwhelming. One of the biggest challenges many people face is deciding what to do with the marital home. It’s often not just a place to live, but a symbol of years spent together. However, when emotions cloud judgment, making the wrong real estate decisions can lead to costly consequences down the road.
If you’re going through a divorce or know someone who is, here are the top 10 real estate mistakes to avoid.
1. Not Understanding Property Division Laws
Why It Matters
In a divorce, the division of property depends on where you live. Some states follow community property laws, meaning all property acquired during the marriage is split 50/50. Other states follow equitable distribution, where assets are divided in a way that is fair but not necessarily equal.
The Mistake
Many people assume that the house will automatically go to one spouse, usually the one with children or the one who’s emotionally attached. However, not understanding the local property division laws can result in disappointment or financial strain.
The Solution
Before making any real estate decisions, it’s crucial to understand your state’s property division laws. Consulting with a lawyer can help you better navigate this process and ensure you’re making informed decisions.
2. Failing to Account for Long-Term Financial Implications
Why It Matters
A house is not just an emotional asset, it’s a financial one. There are taxes, insurance, maintenance costs, and, of course, the mortgage.
The Mistake
People often get so caught up in who will keep the house that they forget to factor in the long-term financial responsibilities. Can you afford the monthly mortgage payments, taxes, and maintenance by yourself? What about the potential for rising property taxes or interest rates?
The Solution
Before making any decisions, carefully assess your current and future financial situation. If you’re not sure about your financial standing, a financial advisor can help you make the right choice.
3. Assuming the Marital Home Will Automatically Be Divided
Why It Matters
It’s easy to assume that the home will be awarded to one spouse, usually the one who wants to keep it or is raising the children. However, that’s not always the case.
The Mistake
Assuming that the house will automatically go to you can be a major mistake. Courts do not always prioritize the home over other assets. In some cases, the property may need to be sold, and the proceeds divided between both parties.
The Solution
It’s important to talk with your attorney about your preferences regarding the marital home. Understand that the court will divide all assets, including the home, based on fairness, not just emotional attachment.
4. Not Getting a Professional Home Appraisal
Why It Matters
Knowing the true value of your home is essential in making informed decisions during the divorce process. Without a proper valuation, you could end up with less than your fair share or make a decision based on inflated values.
The Mistake
Failing to get a professional home appraisal can lead to disagreements or unfair asset division. A simple online valuation is not enough.
The Solution
Hire a licensed appraiser to determine the current market value of your home. This will ensure that both parties are on the same page when it comes to the value of the house, and it can also serve as a reference point during negotiations.
5. Overlooking the Mortgage and Debt Implications
Why It Matters
Dividing the house itself is just one part of the equation. The mortgage is another. If one spouse takes ownership of the home, they are also assuming responsibility for the mortgage, which can be a significant financial burden.
The Mistake
Many people make the mistake of assuming that the mortgage will remain the same after the divorce. In reality, if one spouse keeps the home, they may need to refinance the mortgage to remove the other party’s name from the loan.
The Solution
Before agreeing to keep the house, consult with a financial advisor or mortgage professional to understand how refinancing works. Ensure that you can afford the mortgage payments on your own, and make sure your name is removed from the loan if you’re not keeping the property.
6. Letting Emotions Guide Your Decisions
Why It Matters
The marital home often holds a lot of emotional weight, especially if you raised children there. It can be tempting to want to keep the house as a way to preserve those memories.
The Mistake
Making decisions based solely on emotions can cloud your judgment. Holding onto a home that you can’t afford or maintaining an oversized property out of attachment can lead to financial strain in the future.
The Solution
Take a step back and assess the situation objectively. While it’s natural to have emotional ties to the house, it’s important to prioritize financial stability and long-term goals. Sometimes selling the house and starting fresh is the best option.
7. Ignoring Tax Implications of Selling or Transferring the House
Why It Matters
Selling or transferring a home during a divorce can have significant tax consequences. From capital gains taxes to other potential fees, these costs can add up quickly.
The Mistake
Many people fail to consider how selling the house will impact their taxes. Ignoring this can result in unexpected bills down the road.
The Solution
Consult with a tax professional before selling the house or transferring ownership. Understanding the tax implications will help you plan better and avoid financial surprises later.
8. Not Considering Alternative Housing Options
Why It Matters
The marital home may no longer be suitable or affordable after a divorce. There may be better housing options that align more closely with your new financial reality.
The Mistake
Some people assume that they have to stay in the family home, even when it’s not financially practical. This often leads to unnecessary financial stress and long-term dissatisfaction.
The Solution
Explore other housing options, such as renting or downsizing. These options may offer more flexibility and lower living costs, allowing you to regain your financial footing after the divorce.
9. Forgetting to Update the Deed and Mortgage After the Divorce
Why It Matters
Even after the divorce is finalized, many people forget to update the property deed and mortgage documents, which can lead to complications later.
The Mistake
Failing to remove your ex-spouse’s name from the deed or mortgage can create problems when selling the house, refinancing, or in case of foreclosure.
The Solution
Once the divorce is finalized, make sure the deed and mortgage are updated to reflect the new ownership status. This ensures that you are no longer liable for the mortgage if you’re not keeping the home.
10. Not Having a Clear Exit Strategy for the Home
Why It Matters
If both parties can’t agree on what to do with the house, it can become a point of contention throughout the divorce process.
The Mistake
Failing to create a clear exit strategy—whether it’s selling the house or having one spouse buy the other out—can drag out the divorce and increase legal costs.
The Solution
Develop a clear plan with your lawyer and financial advisor regarding the fate of the home. Whether it’s selling the property, buying the other spouse out, or deciding who gets to stay, having a strategy in place will save time and stress.
Final Thoughts
Going through a divorce is challenging, and making decisions about real estate can complicate matters even further. However, by avoiding these common mistakes, you can ensure that your real estate decisions are sound, fair, and in line with your long-term goals.
It’s always a good idea to consult with professionals—lawyers, financial advisors, and real estate agents—who can guide you through the process. Don’t let emotions or lack of knowledge lead to bad decisions. With the right approach, you can navigate your divorce and real estate decisions successfully, and emerge stronger on the other side.
FAQs
1. What happens if both spouses want to keep the house in a divorce?
If both spouses want to keep the house, they’ll need to negotiate or involve the court in deciding who gets to keep it. The house might need to be sold, or one spouse may buy the other out.
2. How do I know the true value of my home during a divorce?
It’s essential to get a professional home appraisal. This ensures you know the accurate market value of the property, which is crucial for equitable division of assets.
3. Can I be forced to sell my home during a divorce?
Yes, in some cases, the court may decide that the home needs to be sold and the proceeds divided. This typically happens if neither spouse can afford to keep the home independently.
4. What should I consider before keeping the marital home after a divorce?
Before keeping the home, assess your ability to afford it. Consider mortgage payments, maintenance, taxes, and long-term financial goals. Don’t make an emotional decision without understanding the financial impact.
5. Will I be taxed if I sell the house during a divorce?
Yes, you may be subject to capital gains taxes when selling the home, depending on its value and how long you’ve owned it. It’s a good idea to consult a tax professional to understand the specific tax implications.
