The Million Dollar Question (and the worry that kept me awake)
by Holly Martins founder of Holly Martins, NJ Real Estate, Real Estate Agent
It’s a question I’ve been asked a lot in the last few years, and it’s one that I've personally wrestled with approximately three thousand times. It always goes something like this:
“Well, we bought the house a decade ago, and now we have the kids, but we’re getting divorced. What do we do??”
What do we do? Four simple little words that are loaded with an unbelievable amount of emotions and uncertainty. The answer to that question isn’t always straightforward.
I’m a Realtor in New Jersey. We’re at about a 7% divorce rate as a state, and while that percentage is below the national average, it’s still a whole lot of people. The topic comes up frequently, especially as my age group coasts into their 40’s. I’ve helped several clients navigate it over the years, and have now unintentionally become the go-to person for divorce advice in my social circle (a badge I wear humbly).
Still, despite having helped others stay level-headed and on-track, when divorce was the road my marriage headed down in 2019 I was totally unprepared. It was a shockingly isolating experience. I was on my own little island and had no one to commiserate with or to seek empathetic guidance from. It felt like my life was put into a blender, and all of the assumptions and plans that we had made for the future were eradicated… which is admittedly not the best set of circumstances for someone who is anxious, a planner, and extremely risk averse. They were dark days, indeed, friends.
“We bought this house a few years ago. What do we do?”
The question kept me up at night for literal years (four years, to be exact). Those words filled me with a smattering of unrelenting feelings and thoughts, which could be most generally summarized as follows:
Panic. We had two very young boys who needed our full attention, but I also had to ramp up my business to become a sole provider. My spouse was the breadwinner, and I took care of the kids while working part time around his schedule. But now I had to do it all. How the heck could I make it happen?
Determination. I wasn’t going to move our kids and dog in with my parents, and I wanted to ensure our boys got to stay in the only home they’d ever known. Heck, I liked our home too, and put a whole lot of sweat equity into the place. It didn’t feel right to leave. Plus, having a giant dog made it hard to find a rental in town, and it wasn’t her fault we were divorcing. Failure wasn’t an option; I had too many things depending on me to succeed in this mission.
Anxiety x1,000,000. Throw COVID into the mix, learning how to parent on my own, learning how to run the house on my own, learning how to build the business, learning how to budget, and the whole thing got a lot more complicated. Deep breaths. Phew.
What do we do with the house? For me, the answer to that plaguing question was simple but not easy: I’d buy out my ex-husband. I’d scrimp and save as much as I could, work my tail off, learn to accept help from others (thank you, Mom, for babysitting consistently; thank you, neighbors, for helping me with the lawn and snow). I worked with a mortgage lender who had earned my trust in the business, and they explored options with me to find a buyout loan that made the most sense for my monthly budget and my nest egg. My ex-husband and I agreed on obtaining an independent appraisal to come up with the market value of the property in an effort to maintain complete neutrality. It wasn’t easy journey–and I definitely aged prematurely in the process–but after four years of worrying and working, the house became legally mine a few months ago.
You might be in that same initial panic of trying to decide who is going to live where and what will make the most sense for you/your spouse/your family/your pets/your commutes/your finances. And that panic is very uncomfortable, but it’s necessary, because it’s going to allow you to consider all of the options and really think through what the BEST next step is for you.
What do we do with the house? The answer to that same question normally comes down to one of two options:
Spousal Buyout:
About half of the people I’ve encountered work out a spousal buyout. In NJ, the formula is pretty simple: current market value less the balance owed on the mortgage(s) is equivalent to the total net proceeds. Split that number in half, add it to the mortgage(s) owed, and you have your buyout number. (This not legal advice, but it is the common course of practice in NJ - your divorce attorney will help you craft an exact financial calculation that is fair and equitable to both parties. They'll also advise you on how to reach an agreement on fair market value, whether by an appraiser or a Realtor.) The math is simple enough in its essence, but it usually kicks up some turmoil between parties especially if there wasn't a clear, even split of "who paid for what"s over the years. You'll also want to review different mortgage options before committing to a loan; I recommend working with a Mortgage Broker who is familiar with divorce situations, since they tend to have more robust options and flexibility.
Selling:
The other half of divorcing couples fall into the “for sale” category. If no one wants the house, it’s sold. If no one can afford to keep the house and buy out their spouse, it’s sold. It’s a matter of emotions and math, math certainly being the easier portion of the equation. Simple, but definitely not easy.
If you decide to sell, your divorce attorneys will have the process, proceeds and incidentals worked out beforehand - and if they don’t, make sure you talk to them. Selling a home is stressful, but navigating that within the rodeo of divorce is a much more significantly complicated process. Ironically, teamwork really is the driving factor behind a successful sale, meaning that you’ll need to collaborate and cooperate with your spouse throughout it; consider it your last dance, if you will (gross, I know). You want to have everything as prepared as possible before putting the house on the market.
And that’s where we Realtors come in. Admittedly, we have a pretty rough reputation out there despite our best efforts; when we are invited into a divorce situation, it’s easy to see who is in it for the commission and who is in it for their clients. I like to believe that if the Realtor’s first questions don’t focus primarily on the wellbeing of their potential clients, they’re probably more concerned about the commission. Don’t hire that person. Of course, you’ll need to hire someone who is an expert in their local market and who will successfully sell your home, but, you also want someone who has your best interests at heart from the very beginning to the very end. Your Realtor can help guide you through what to look out for and what questions to ask your attorney to ensure you’re prepared before the house is on the market, too.
So, what do you do with the house? It really depends on what makes the most financial and emotional sense for you both. If you’re not sure, ask yourself:
Do you want to continue to live there, or do you want to create new memories elsewhere?
If you stay, will you be able to afford the mortgage, taxes, insurance, and upkeep?
Does your spouse want to stay in the house, or do they want to move out?
Do you have an emergency fund saved up to help you on a rainy day (and if you don’t, how can you save one up considering cost of living expenses)?
Will the proceeds of the house sale make a positive impact on your life?
Would you regret selling the house if you could’ve stayed?
What feels like the best move for the kids, if you have them?
What will keep you sane and happy moving forward?
Not every situation is the same. Make sure you take the time to sit with all of your possibilities and uncertainties and figure out what makes the most sense for YOU. I did what I needed to for myself and my kids, and while it scared the hell out of me, I’ve got no regrets. Do yourself that kindness, too, and figure out what will motivate you to move forward! What you do with the house will fall into place from there. Surround yourself with people who will uplift you, and believe in yourself.
Remember to surround yourself with people who will uplift you. Believe in yourself and your “why”, whatever it is. Stay grounded and realistic in your financial calculations. You’ve got this.
Learn more about and how to work with Holly Martins here!
Please note that the blogpost above does not represent the thoughts or opinions of Fresh Start Registry and solely represents the original author’s perspective.