In 2021, there were 689,308 divorces in the United States (across 45 states that report this statistic). In case you’re curious, 1,985,072 couples got married in the same year.
While divorce is an unpleasant topic, it can be an important issue when buying a house. Specifically when buying a house from a couple that is divorcing and selling their house as part of the divorce (i.e. division of family assets).
On the surface, it would seem buyers stand to gain given that in some divorce situations there’s an urgency to sell a house. However, that is not always the case. There are pitfalls to be aware of when buying a house from a divorcing couple.
6 Pitfalls to Be Aware of When Buying a House from a Divorcing Couple
1. Emotional Complications
Divorce is an emotionally charged event, and emotions can spill over into the home-selling process. Buyers might find themselves caught in the middle of disputes or negotiating tactics fueled by emotions rather than reason. It’s important to maintain professional communication and possibly engage a mediator if interactions become too charged.
2. Title and Ownership Issues
Ensuring that the title is clear and that both parties have agreed to sell can be more complicated when dealing with a divorcing couple. There might be disputes about ownership or one party might attempt to block the sale. It’s crucial to verify that both parties have consented to the sale and that all legalities are addressed.
This is something your realtor should determine ASAP.
3. Urgency to Sell
While the urgency to sell can lead to a lower price, it might also mean the house hasn’t been properly maintained or prepared for sale. Buyers should conduct a thorough inspection to avoid inheriting costly repairs and should be wary of skipping steps in the usual buying process just to close a deal quickly.
4. Complex Negotiations
Negotiations with a divorcing couple can be unpredictable, as each party might have different expectations and desires from the sale. This can lead to unusual demands or last-minute changes to the agreement. Buyers should be prepared for a potentially protracted and complex negotiation process.
5. Legal Delays
Divorce proceedings can affect the timing of the sale. Legal issues, such as the finalization of the divorce or settlement agreements, may delay the process. It’s advisable for buyers to have flexible timelines and to stay informed about any court decisions or legal steps that might impact the sale.
6. Financial Discrepancies
Financial issues can arise, such as discrepancies over the division of proceeds from the sale. Ensure that the division of the sale’s proceeds is clearly outlined and agreed upon in the divorce decree or settlement to prevent financial disputes from delaying the transaction.
What if both people in a marriage haven’t agreed to sell? Is that a problem?
Yes, if both people in a marriage haven’t signed the listing agreement, it can indeed be a problem when trying to purchase a home from a divorcing couple. Here’s why:
a) Legal Authority to Sell
A listing agreement is a contract between the home sellers and their real estate agent, detailing the terms under which the property will be sold. If only one party signs this agreement, it may not provide the legal authority to sell the property, especially if the other party still holds rights to it. This can lead to complications in the legality of the sale.
b) Ownership Rights
In many places, a property acquired during a marriage is considered marital property and both parties have ownership rights. Without the consent and signature of both parties on the listing agreement, the sale could be challenged or blocked by the non-signing party.
c) Risk to the Buyer
For the buyer, proceeding with a purchase under these conditions carries significant risk. If the sale were to go forward without the consent of both owners, the buyer could potentially face legal challenges from the non-consenting party, which could jeopardize their claim to the property or embroil them in legal disputes.
I’m sure it’s more common for both people to agree before listing a house but sometimes people are unreasonable and they proceed by trying to complicate every step of a divorce including selling their home.
Are there any benefits to buying a house from a couple getting divorced?
Yeah, in some situations, there may be advantages, but I’m sure it’s not worth looking specifically to buy a home being sold as a result of divorce.
1. Motivated Sellers
Divorcing couples are often motivated to sell quickly to liquidate their assets and facilitate the settlement of their divorce. This urgency can work in the buyer’s favor, potentially leading to a lower purchase price compared to the market rate.
2. Less Competition
Properties sold by divorcing couples might attract less interest due to the potential complexities involved. This reduced competition can be beneficial for buyers looking for a less crowded market, providing more room to negotiate better terms.
3. Opportunity for Value Increases
Because these homes are often priced to sell quickly, they might be listed at a price that is below their potential market value. With the right improvements and market conditions, buyers might see an increase in the value of their investment faster than with other properties.
4. Flexible Terms
Divorcing couples might be more flexible on terms other than price, such as closing dates or including appliances and furniture to expedite the sale. This can be advantageous for buyers looking for a good deal or who need flexibility in move-in conditions.
Are there any other nuanced issues I should know about when buying a house from a divorcing couple that you have not mentioned above?
Here are additional complexities you might encounter:
1. Incomplete or Delayed Disclosure
In the chaos and stress of a divorce, important details about the property might be overlooked or undisclosed intentionally or unintentionally. This can include pending repairs, issues with the home’s systems, or other defects that could affect the property’s value or your decision to buy.
2. Change in Sale Terms
The terms of the sale could change unexpectedly if the divorce proceedings impact the financial or personal situations of the sellers. For instance, if one party suddenly demands a higher share of the proceeds, it could complicate or delay the closing process.
3. Emotional Attachment to the Property
One or both parties might have a strong emotional attachment to the home, which can lead to second-guessing the decision to sell as the process moves forward. This could result in last-minute withdrawal from the agreement or demands for adjustments to the sale terms.
4. Coordinating with Multiple Parties
Dealing with a divorcing couple means you are essentially negotiating with two parties who may not be in agreement with each other. This can make communication and decision-making more challenging, as each party may have different objectives or levels of urgency.
5. Legal Advisers’ Involvement
The sellers will likely have separate legal advisers who may have differing opinions on how the sale should proceed. This can introduce more complexity into negotiations and the finalization of sale terms.
6. Impact on Future Renovations or Improvements
If there are existing disputes about the property boundaries or agreements with neighbors (such as shared driveways or fences), these issues can carry over to you as the new owner, potentially affecting future renovations or improvements.
7. Psychological Stress
The stress of buying from a divorcing couple can be higher than in a standard property transaction. Being prepared for a potentially erratic or emotionally charged process is important.
How to avoid the pitfalls generally?
A simple way is to hire a realtor who has experience with this situation. It definitely might involve some additional steps to complete the purchase and while buying a house is already a process filled with challenges, you just might end up with the home of your dreams.
Should you avoid pursuing any house that is listed for sale in in a divorce scenario? Is it a predatory purchase?
I suppose it could be viewed as a predatory purchase, but generally speaking, if a divorcing couple needs to sell, they need to sell. I wouldn’t avoid the situation unless, for instance, one of the sellers hasn’t signed any agreement to sell. If they can unilaterally hold up the process, then it’s not worth doing. This is why a good realtor will ensure before you make an offer, that if accepted, the transaction can proceed smoothly.
