Deciding which spouse keeps the home after a divorce isn’t always easy. Although it’s typically a choice based on familial and financial practicality, the process can still be an emotional one.
Plus, even after you’ve decided which spouse will keep the matrimonial home, navigating the buyout itself can come with complexities.
One of the most common questions regarding spousal buyouts is: Do we need to work with a Realtor? Although the home isn’t hitting the open market, there is a formal real estate transaction happening – one that requires support from multiple industry professionals.
In this blog, I’ll touch on some of the essential considerations that come with spousal buyouts, including the important role a Realtor can play in them. Let’s get started.
What is a Spousal Buyout?
When one spouse chooses to keep the previously-shared home in the event of a divorce, they’ll need to buy out the other’s share. This process is called a spousal buyout.
On paper, spousal buyouts are fairly straightforward. However, key details (that both parties must agree on), such as determining who stays in the house, if they can afford it on a single income, and what the property is worth, can make the process complicated. That’s where the guidance of a professional expert can come in handy (more on that later).
In the case of non-married or common law couples, the process can also be referred to as a partner buyout. That being said, partner buyouts can be even more nuanced from a financial and legal perspective. If you are separated from someone you were not formally married to, it’s a good idea to consult your lawyer before you begin the buyout process.
Searching for more divorce-related real estate resources? Explore these other blog posts.
Matrimonial Home Basics
Before you approach the spousal buyout process, it’s important to understand who is entitled to what in terms of shared assets and property.
In Ontario, the family home (known as the “matrimonial home”) has a unique status. Legally speaking, both spouses share equal, 50/50 rights to the home (and its equity). This is true even if one person has made greater financial contributions to the mortgage or owned the property independently before getting married.
So, how does this impact spousal buyouts? Since each spouse is entitled to the same share, the person who keeps the home will need to compensate the other for 50% of its value. This will be the buyout amount.
What Is Your Matrimonial Home Worth?
When one spouse buys out the other, they aren’t paying 50% of the original price of the property. Rather, the amount owed must reflect the home’s current market value. So, how do you determine what the house is worth in today’s market?
Calculating equity is a nuanced process. Because no home has an objective market value, both parties must agree on a number that feels accurate and fair. If neither you nor your ex-spouse is a real estate agent, this will require professional help.
This is where a Realtor comes in. If both spouses are comfortable with it, you can work with a single real estate professional who will appraise the home to determine what it could be worth in the current market. Once you have that number, you can continue with the buyout process.
If it makes you feel more comfortable, you and your ex-spouse may choose to each enlist the help of your own Realtor. Each agent will perform a separate evaluation and present the results to both parties. If there is a disparity between estimates, you can ideally settle on a middle ground between the two values.
While this route will add an extra step to your buyout, it is worth it if you feel skeptical that a single Realtor can provide a truly unbiased appraisal. When both parties feel advocated for, it can help ease certain anxieties.
CMHC Spousal Buyout Program: How it Works
Buying out an ex-spouse’s equity is no small purchase. Sure, it may be just 50% of the home’s total value, but that’s still a lot of money.
To help families manage a financial commitment of this scale, the Canada Mortgage and Housing Corporation (CMHC) created a specific spousal buyout program, which allows the buyer (i.e. the person who is keeping the home) to refinance their existing mortgage up to 95% of the home’s appraised value. This is especially helpful for individuals who lack significant liquid assets to cover the buyout cost directly.
On the hunt for more family-focused real estate advice? You’ll want to read these blogs next!
- What Are The Top Oakville Neighbourhoods For Kids?
- Is Oakville a Good Place to Live?
- Moving Up – Should You Buy Your Next Home Before You Sell?
How Else Can A Realtor Help?
If you’re being bought out by your former spouse and will be moving to a new home, a Realtor can also help you find the perfect place for your next chapter. As your link to the local market, they can connect you with properties that suit your needs and budget, all while keeping the process light and enjoyable.
Navigating a divorce? I’m here to provide compassionate expert support. To get in touch call 905-464-7653 or email me at stacey@staceyrobinson.com.
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