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Special Terms Needed
Regardless of whether a divorcing couple comes to an agreement whereby one party remains in the marital residence, or if the divorcing couple decides that selling or renting the marital residence is the most desirable way to dispose of the marital home post-divorce, the couple must reduce their agreement to writing the form of a Settlement Agreement or a Marital Dissolution Agreement. As there are multiple routes a divorcing couple may take when determining what to do with a marital residence during divorce, the terms of any settlement agreement regarding the disposition of any marital real property must be clear and complete. With this being said, any Settlement Agreement purporting to dispose of a divorcing couple’s real estate property, whether it be the marital home or investment property, should address the following issues at a minimum.
Occupancy financial responsibility
Who will temporarily occupy the marital home before the divorce is finalized, and who will permanently occupy the marital home post-divorce? The Settlement Agreement should set out specifically who will be occupying the marital home, how long the occupancy is to endure and who will be responsible for the financial responsibilities associated with the marital home, such as the mortgage, homeowners insurance, maintenance costs, homeowner’s association fees and utilities.
Who will be liable for the mortgage once the divorce is final? Often, when purchasing a home, married couples not only jointly title the home in both spouses’ names but also jointly finance the home as well. What this means is that both spouses’ names will be on the mortgage, and thus both spouses will be equally liable to the mortgage company. Divorce doesn’t change this, even if the marital home is awarded to one spouse solely. It is important for the spouse who will not be residing in the marital home to insist that the other spouse successfully refinances the marital home into that spouse’s name solely. This is important because it will protect the spouse who is out of the house in the event the other spouse fails to pay the mortgage. Settlement Agreement terms regarding this issues are particularly important, because a failure to unequivocally state that one spouse must refinance the marital home into their name solely may result in both spouses remaining liable on the mortgage until it is satisfied or until the home is sold.
Sell at a later date
Due to the current state of the housing market, many couples who would otherwise sell their marital home upon divorce are retaining it until the house may be sold at an acceptable price. Generally when this occurs, one spouse remains in the home until both spouses determine it is time to sell. In this case, it is imperative that the Settlement Agreement clearly spells out which spouse is to remain in the home, which spouse is to pay the mortgage or how the mortgage payment will be split, who will be responsible for maintenance on the home, the date the home is to be placed on the market, how the listing price will be determined, what real estate agent will handle the sale and how any profit from the home is divided. It is important to have the details laid out in the Settlement Agreement. Otherwise disagreements and conflict may arise months or even years after the divorce that may result in additional and costly litigation.
Initial listing price
How much will the home be sold for? This seems simple enough. However, if the home is underwater, or worth less than the outstanding mortgage amount, the decision on how much to sell the marital home for becomes more complicated. Should the listing price be set at a price that would satisfy the mortgage if sold, or should the price be set lower to induce potential buyers to purchase the home more quickly? The initial listing should be included in the Settlement Agreement along with other settlement terms regarding the disposition of marital real property.
Auto-reductions in sale price
Once the initial listing price has been determined and included in the Settlement agreement, it is also essential to include provisions concerning how the listing price should be reduced in the event the home does not attract an interested buyer within a certain time period. A provision such as this would set out how long the homes must remain on the market before reducing the listing price, how many times the listing price may be reduced, how much he listing price may be reduced by, and the lowest price for which the home may be listed on the market.
Right of first refusal
Many couples attached a large amount of emotional significance to a marital home. Even if it is determined that one spouse will retain the marital home to the exclusion of the other, the other spouse may desire to be notified when the home decides to sell. More importantly, that spouse may want the guaranteed option that if the home is put up for sale that he or she will have the first right of refusal when it comes to purchasing the home. Thus, a provision outlining this option should be included in the divorcing couple’s Marital Dissolution Agreement to ensure the spouse leaving the marital residence has first choice if the home is ever placed on the market for sale.
Who will sell the home? This decision also seems relatively simple and rote. However, especially in particularly contentious divorces, it is best practice to be as specific as possible when it comes to dealing with the disposition of a large asset such as a home. Listing agents should be vetted, and the agent who will be able to provide the needed services at the price point that the couple is comfortable with should be selected, and this selection should be memorialized in the Settlement Agreement.
Division of home sale proceeds
Finally, one issue that has the greatest potential to cause conflict post-divorce is how the home sale proceeds are to be divided if the home is sold. Unfortunately, many divorcing couples do not have to consider what to do with home sale proceeds in the event the marital home is sold, because the marital home is underwater and a sale will likely result in a deficiency, not proceeds. But, for a few fortunate divorcing couples, this issue should also be addressed very carefully in their Marital Settlement Agreement. The manner in which the proceeds are to be split should be clearly laid out. For example, if the proceeds should be split equally between the two parties after all fees and expenses incident to the sale of the home have been satisfied, the terms of the Agreement should read as follows:
“Upon the sale of the marital residence, Husband and Wife shall spit equally the net home sale proceeds. The amount of the net home sale proceeds shall be determined after any payments necessary to satisfy any sales commissions, closing costs and any additional expenses of sale have been satisfied.”
Every divorce is different and each case comes with certain circumstances that are unique to that individual case. Thus, additional settlement provisions other than the ones listed above may be necessary depending on the situation. For information on how Georgia’s equitable distribution laws may impact your divorce and on which settlement terms may be most appropriate in your matter, contact a Georgia divorce attorney with the experience necessary to reach a fair financial distribution in your matter.