Divorce And Selling Your Home

Divorce and selling your home can be two very emotional and overwhelming experiences, but with the right help, you can avoid costly mistakes in order to make the process as stress-free as possible. As a Toronto real estate agent who has assisted clients with selling their homes due to divorce, I understand how stressful the process can be for everyone involved. I have put together this article to help answer any questions you may have about the process of selling your home due to divorce.

In this article, we’ll summarize what qualifies as a matrimonial home, the rights relating to the matrimonial home for each spouse during separation, the process of selling a house in Toronto along with guidance on how to make the sale as smooth and successful as possible.

What Is A Matrimonial Home?

It’s important to understand what defines a matrimonial home here in Toronto.

Section 18(1) of the Family Law Act defines a matrimonial home as any property which either spouse has an interest and is currently, or was at the time of separation, ordinarily occupied by the person and his or her spouse as their family residence.

There are no restrictions in regards to what type of property qualifies as a matrimonial home here in Toronto and throughout Ontario. Whether it is a condo in the city, a cottage in cottage country or a mobile home, there are no restrictions so long as the property is owned by one or both spouses and the property is “ordinarily occupied” by the spouses at the time of separation.

A common misconception relating to the matrimonial home is that there can only be one matrimonial home which is incorrect. In Ontario, spouses can have more than one matrimonial home. Make sure you speak to a reputable real estate lawyer to understand the designation of each property you own prior to listing any of your properties for sale.

Your Rights

There are three options when it comes to the what can be done with the matrimonial home during a divorce:

1. You and your spouse can sell the home and divide any profit from the sale as well as any equity you have built in the home.
2. You can buy out your spouse’s share of the property and continue living in the home.
3. Your spouse can buy out your share of the property and continue living in the home.

The second and third option would likely require  the opinion of both an appraiser and a reputable real estate agent in order to determine what would be fair market value for the home. However, it is important to understand the risks associated with this option. The best way to determine a properties true market value is always by listing it on the open market as buyers will ultimately decide how much your home is worth. Additionally, depending on the market at the time that you list, there is always the potential for a bidding war which could substantially increase the final sale price of the home. This is just something to consider and to discuss with a real estate agent prior to agreeing buy out your spouse.

Your rights during the separation process:

• Both spouses have the right to stay living in the matrimonial home until it is sold. However, in some cases, a judge may need to get involved and one spouse may need to leave the property. This is typically due to unsafe living arrangements where one or both spouses are perceived as a threat to those living in the home.
• Both spouses must jointly agree to sell the home. If one spouse refuses, an application to the courts may be required in order to sell the home.
• Neither spouse can mortgage, sublet, rent or sell the home without the permission of the other spouse.
• If the property is being used for traditional residential purposes, in most cases, both spouses have rights to any profits from the sale of the property, even if only one spouse’s name is on title, so long as the property was being “ordinarily occupied” by the spouses at the time of the separation.
• If the property is owned under a corporation which both spouses own unequal shares, based on the Family Law Act, the spouse who owns the majority of the shares (majority shareholder) is considered to be the owner of the home.
• Another important rule to take into consideration is that if the property was being used for commercial purposes such as a farm or business, the Family Law Act states that only the portion of the property that “may reasonably be regarded as necessary to the use and enjoyment of the residence” can be considered the matrimonial home.
• It is important to note that common-law couples do not have statutory property rights in Ontario. Speak with a family lawyer about your rights if you are in a common-law relationship in order to understand all of your rights.

It’s important that you speak with a lawyer who specializes in family law and who knows the Family Law Act to understand all of your rights, before, during and after the separation.

Selling Your Home 

When selling your home due to divorce, it is crucial that both spouses work together as much as possible in order to achieve the best possible price for the home. It is in the best interest of both spouses to work together during this time as both will be splitting any profit derived from the sale of the property. Below is a list of just some of the items and situations where both parties will need to come to an agreement before and during the listing process.

• Deciding which real estate agent to use.
• Deciding on which repairs may be needed before listing the property and who will cover the costs of such repairs.
• Deciding whether or not you will obtain a pre-list home inspection and who will cover the cost of such inspection.
• Deciding whether the property will be staged or not. Picking the stager and agreeing on who will cover any costs associated with such staging if it’s not covered by your real estate agent.
• Deciding whether both spouses and any children or pets will vacate the property during the listing period in order to ensure the property shows as best as possible during showings.
• Deciding whether or not to hold an offer date.
• Deciding on an appropriate list price with the guidance of your real estate agent.
• Agreeing on pricing during the negotiation period with the assistance of your real estate agent.
• Deciding on a absolute minimum price that both of you are willing to sell the property for. It is ideal to agree on the absolute lowest sale price you are willing to sell for prior to listing the property in order to avoid any issues during the negotiation process.

It is also important to take into consideration all of the costs associated with selling your matrimonial home when forecasting any potential split of equity from the sale. Below is a list of the larger costs to consider.

• Real estate commission – Typically 5% + HST of the final sale price with 2.5% of that amount going to the co-operating brokerage (buyer’s agent/brokerage). For example, if you were to sell your home for $1,000,000, the total commission will be $56,500 including HST. This commission is paid to your real estate agent and the buyer’s agent on closing.
• Real estate closing fees –  These can range in price. However, for a $1M sale, it’s safe to plan for legal fees of somewhere between $1,000 – $2,000. For example, one Toronto real estate lawyer who I have worked with many times, charges $1,475  + HST for a $1M sale. There are some real estate lawyers who offer a significantly reduced fee. However, based on my experience, you get what you pay for and if you want a real estate lawyer who will be responsive, professional and precise, you’re better off paying the going rate for a reputable real estate lawyer. The last thing you want is to run into issues on closing due to using a discount lawyer, I’ve seen this happen in the past and it can be quite stressful.
• Moving costs – Moving costs can range depending on how much is being moved and the distance it is being moved. However, it’s safe to account for around $2,000 give or take for a move depending on which company you use.

Divorce and selling your home can be an incredibly difficult and emotional time, but it doesn’t have to cause too much disruption in your life. Selling a house in Toronto due to divorce may seem like an overwhelming task, but if you take the right steps, you can make the process as stress-free as possible. Speak with a family lawyer, take the time to go over your finances and consider getting help from a local reputable real estate agent. By taking these steps and understanding the process of selling a home due to divorce, you can ensure that you are making the best decision for both parties involved.

Do you have questions about selling, buying or about the market in general or do you need a referral to a family lawyer? Contact me any time with your questions or to discuss how I can help you achieve your specific real estate objectives.