When we were doing the research for the article "We Buy Ugly Houses," Tcat referred to a personal situation, where a less than top dollar offer was just fine. Gudrun came up with a number of other situations where this also made sense. Her first situation was that of stopping foreclosure.
Here we are going to look at another popular reason for just moving on quickly. Today we will consider Divorce and Community Property. Thanks to modern medicine, people live a lot longer now. While that's great, one of the unintended consequences is couples now live long enough that they can grow apart. The question becomes what to do with the house?
One option is to sell the house prior to the divorce settlement. While choice this provides both parties with a great flexibility and cash liquidity in their changing lives. The downside is it typically means not getting full market value. Another option is to sell the house shortly following the divorce. The "gotchas" to look for in this scenario include: equity is not liquid, repairs must be handled, and ongoing cooperation regarding taxes and mortgage payments due can add to the stresses.
Yet another path to take would be transferring the title to one party is part of the divorce decree. If you're going down this road, both Tcat and Gudrun agrees that you should have three different real estate brokers provide a realistic estimate for valuation. After you have come up with a fair number, be sure to include a discount on the value (typically 7%) which would've been used up in transaction fees selling the joint.
If there is a large capital gain on the property, double-check with a tax consultant or tax attorney to make sure you're not painting yourself into a corner when transferring the joint title to the agreed single owner without making arrangements on the capital gains taxation...
Just as in life itself, there is no sole best solution for everybody when you're dealing with something as complex as divorce and real estate. The two of us have been studying a lesser-known alternative that may be advantageous in the current soft real estate market.
It is possible for the parties to be released from the legal interests, while separately retaining the equitable interest of the house. And no, we are not talking about lease option to buy. We both feel there are too many possible "gotchas" going down that road. Unfortunately, it takes a little more 'whitespace' to explain this option than we have in this article. We are working on that series. In the meantime, if you have to sell your house fast, and you want a full price offer, feel free to contact either of us.
Gudrun and Tcat have been studying several approaches that while are admittedly creative; and they represent real win/win options, avoiding the game of somebody winning at the expense of someone else losing. The "Secret Sauce" depends on the use of time and US tax code. We'll cover this in a separate series of articles.
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