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Selling property under duress: debt or divorce

Sep 18, 2020

When you have to sell your home due to debt or divorce, this can be an extremely traumatic experience. However, with the right help and advice, it is possible to get through it and move onto the next phase of your life. Here is some essential information to help you make the transition as smoothly as possible.

Selling your home due to debt

The combination of cooling in the property market and recent changes to home loans might have resulted in you feeling you have overextended yourself as a property investor. Property prices have fallen, so you might find yourself facing negative equity in one or more properties, which could prompt banks to force you to sell.

You can also fall into financial hardship for other unexpected reasons, such as losing your job. This can mean you struggle to keep up with mortgage repayments. If you are in financial difficulty, it is essential to contact your lender as soon as possible to discuss your situation and work out a plan ‒ before they start proceedings to repossess your home.

If you need to sell your home to repay your debts, you need to get permission from the lender. This will be given if your repayments are up to date and the sale of your property will cover your debts. If you have missed payments due to financial hardship, your lender will help you to arrange a repayment plan where you agree to sell your home within a given time period.

Selling your home due to divorce

Divorce is never easy, and the division of assets, including your home, can make a bad situation much worse if it is not handled correctly. Here’s what you need to know to make the process run more smoothly.

  1. Selling a property before a divorce settlement

If you and your partner can come to an amicable agreement about your assets, you won’t have to go to court. You can have the property valued and decide between yourselves and your legal advisers who gets what share.

One partner might choose to buy the other out if one of you wants to stay in the home, but this is likely to involve refinancing your home loan. You might have to take out a new loan to do this, as changing names on mortgages is not allowed.

  1. Selling a house while separated

Once you and your partner decide to separate, it is essential to get legal advice as quickly as possible. If you are a married couple, all property adjustments have to be made within one year of divorcing.

If you separate from a partner you have been living with but not married to, you have two years from the date of your separation to make your property adjustments.

  1. Who pays the mortgage after separation?

Obviously, if you and your partner separate, you will each need to get your own finances in order so they are not still combined. You might be able to decide between yourselves who will pay the mortgage. However, if your separation is not amicable, the Family Court can decide this matter.

  1. How to sell a house when one partner refuses

If your ex-spouse refuses to sell the house, you can take the case to the Family Court. The judge can make a court ordered sale of a house in a divorce. This involves having the property valued and sold for that value.

Ideally, you should try to avoid having to force the sale of a house by court order, as this can make the process more traumatic and bitter, but the option is there as a last resort should you need it.

Why you need a good real estate to help you through

As well as a good legal adviser, you also need a reputable and experienced real estate agent. This can make the process run much more smoothly for you, particularly if they have experience with home sales due to debt or divorce. The right agent should be able to empathise with your situation while still being efficient enough to achieve a fast, stress-free sale.

When choosing an agent, you should look for someone who has experience in the local property market and a good database of potential buyers, as well as being able to advise you on how to prepare your home to make it as appealing as possible.

If you have to sell your home in traumatic circumstances, we are always here to make things easier for you and help you move on with your life. Please contact us if you would like more information.

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