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Selling the family home after separation: are divorce lawyers and judges really necessary?

When spouses decide to separate, joint family assets are usually liquidated and divided.  The family home is often the most valuable asset that needs to be addressed.  However, of all the assets, the home is the one that often carries the most sentimental value and triggers the strongest emotional response.  In many cases, the separation is not mutual and, in those instances, the spouse who did not initiate the separation may not be willing to vacate or sell the family home.  That is, the spouse may not want to undergo the upheaval of changing residences, changing the children’s school, leaving close neighbours or settling into a new community – all valid reasons to not want to sell the home.  Alternatively, the spouse may wish to oppose, delay or obstruct the sale of the home because of feelings of hurt and anger or other reasons not considered valid.  In some cases, one spouse may wish to purchase the other spouse’s interest in the family home. With any joint asset, because both spouses are the legal owners, neither has a superior right to purchase the asset from the other.  Thus, in cases of a jointly owned family home, if one spouse wishes to remain in the home and purchase the other spouse’s interest, the spouses must agree on a process to determine its value and buy-out.  In most cases, this is simple.  The spouses retain an accredited real estate appraiser to perform an analysis of comparable homes in the neighbourhood, assess their sales history, adjust for differing characteristics such as lot size, garages, square footage and the condition of the structure, in arriving at an expert opinion on the market value of the home.  This often is the best evidence of the value of the family home which the spouses can use to negotiate a buy-out.

But what happens if one spouse does not agree with the appraised value, or even multiple appraisals ?  Some spouses believe that the only way to determine the true market value of a home is to expose it to the public marketplace of potential buyers.  In major cities throughout Canada, homes have been sold for prices far above the listing price due to competing offers to purchase from desperate buyers.  Stories of “bidding wars” and “sold over ask” have covered the real estate section of newspapers for years.  Some realtors who are competing for new business may make exaggerated representations to home-owners to “get the listing” with promises of a high sale price.

In the field of divorce, it is not uncommon for the spouses to distrust one another and harbour suspicions that any agreement that is negotiated is unfair and otherwise favourable to the other spouse.  This emotional state makes it easy to be persuaded by a real estate agent who is eager to obtain a new listing by promising a sale price much higher than its appraised value.  In these cases, the otherwise simple process of an appraisal and buy-out is replaced with divorce lawyers, litigation and judges.  Tens of thousands of dollars can be spent on interlocutory motions to compel a sale of the jointly owned family home, including contested hearings on who the real estate agent should be, whether monies should be spent on repairs and improvements, if costs are to be incurred for staging the home, orders for home inspections, vacant possession of the home to permit open houses and showings and a protocol for the collection and acceptance of an offer.  In these cases, the spouse who wishes to purchase the home is to be treated the same as any arm’s length buyer.  That is, that spouse is not permitted to have any advantage over any other buyer in order to ensure a fair and transparent process leading to a sale at fair market value.  In the case of multiple offers, the court can order that either spouse cannot view the offers before submitting his/her own offer.  For this to operate smoothly, the sale and offer process must be firm and defined in advance.

The following are 10 tips to help counsel manage the forced sale of a jointly owned family home where one spouse wishes to buy the home:

1.  Get a home appraisal by an accredited real estate appraiser (AACI or CRA) and make an offer at, or higher than, its appraised value, minus a discounted sum for the real estate commissions.

2. If that offer is rejected, agree to a listing on the open market.  Don’t resist such a motion but rather negotiate a process to permit a purchase by one spouse.

3. Ensure that the real estate agent retained is responsible, ethical and trustworthy so that dealings with both sides are fair and transparent.

4. Negotiate the Listing Agreement to exempt or discount the real estate commission in case of a purchase by the joint owner.

5. Set a timetable for showings including a date for a real estate agent open house, a date for public open houses and a date for the submission of offers.

6. Obtain a home inspection and make the report available to all potential buyers so as to eliminate this as a condition of sale.

7. Establish the protocol for acceptance of offers and signing back counter-offers, such as only considering offers without any conditions.

8. Consult the listing agent (before being retained) for what repairs, improvements and staging, if any, are recommended and then negotiate the sharing of these expenses, either at the time incurred or at closing.

9. Maintain communication with the listing agent by monitoring the progress of sale, collecting feedback on the response from the showings and form an understanding of the possibility of competing offers.

10. Participate in the sale process by assisting the spouse to make an offer, reviewing any offers presented and advising on the signing back of any offers and counter-offers;  this may involve a real estate lawyer to also advise on terms or conditions attached to the sale such as closing dates, pre-closing viewings, chattel inclusions and exclusions, adjustments and vacant possession.

Following these steps, the sale of a family home, even in the higher conflict divorce cases, could be achieved with much less cost and aggravation than caused by a court-ordered sale.