Amir Mirbolooki - BEST SELLING OPTIONS IN A DIVORCE

BEST SELLING OPTIONS IN A DIVORCE

Amir Mirbolooki bolooki

Table Of Contents

Your Home And The Family Law Act Of Ontario 2

Be Prepared

Marital Settlement Agreement

The 80/20 Rule

Relating The 80/20 Rule To Home Selling

Creating Curb Appeal

Staging With Purpose

Upgrade With ROI In Mind

The Three D's

10. How To Market Your Home

11. Common Seller Mistakes

12. Avoid Costly Mistakes

13. Finding Buyers

14. Be A Power Negotiator

15. The Dos And Don'ts Of Negotiating

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16. Bargaining Chips

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17. Serious Considerations

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Introduction Are you or someone you know going through a divorce? You are likely not surprised to know how common divorce is in Canada. Unfortunately, 38 to 40% of marriages in Canada result in divorce. This suggests that divorce would occur in two out of every five Canadian marriages. Statistics Canada says the number of divorces granted in 2020 was the lowest seen since 1973, although barriers to accessing court services during the pandemic likely contributed to the decline. The agency says there were 42,933 divorces granted in 2020, a “sharp decrease” from 56,937 divorces recorded a year earlier.

A CLOSER LOOK AT DIVORCE STATISTICS

• The average age of divorce is 46 years old. • 40% of marriages end in divorce. • Spouses can file jointly for a divorce, and 31% of them do just that. • Canada has the 29th highest divorce rate in the world. • The divorce rate is lower among couples aged 50 and up, amounting to just 26%. This is still nearly a quarter of the marriages within this age bracket. • The average Canadian divorce takes 3 years. The minimum amount of time is generally 12 to 18 months, but it can take longer if both couples spend a lot of time- fighting over the settlement. • 60% of second marriages end in divorce. • 73% of third marriages end in divorce. • 34% of divorces are caused by domestic violence, verbal abuse, or physical abuse.

• Infidelity accounts for 27% of divorces. • An average of 25% of couples report that money problems played a role in their divorce. • The average Canadian divorce costs between $3,000 to $18,000. Why such a big range? Divorce cases that proceed in an uncontested manner in court or are resolved by way of a Separation Agreement result in lower fees. The higher range represents those cases where parties are litigating their matter in court (this is also known as a contested divorce). • 66 percent of divorced parties do not have any intention to remarry. • Only 8% of Canadians have prenuptial agreements, despite the high divorce rate. Statistics show that in Canada, as many as one-third of relationships (common-law unions and marriages) end in separation or divorce. With the rising growth of relationship breakdown, there has also been a lot of misinformation and confusion, which involves “WHO GETS WHAT and HOW WILL IT BE DONE” in a property settlement after a divorce or separation. For the purpose of this book, “married” is defined as a couple who have or had a legally recognized marriage. It is also important to note that couples who live together as spouses in Ontario for at least three years but are not legally married to each other are considered to be in a common-law relationship. The rules are different for couples who are or were living in a common-law relationship than for couples who are or were legally married when it comes to dividing property, making decisions about selling the family home, who is allowed to stay in the family home, or who is entitled to receive the benefits from vi

the sale of the family home.

Getting a prenuptial agreement is one of the very best ways to protect yourself. With a prenup, the major financial issues of divorce are taken care of long before a union dissolves. Both parties know what to expect. Prenups must be fair. One-sided prenups are neither legal nor enforceable in Canada. Prenups can protect vital premarital assets like inherited property, intellectual property, and businesses that you might bring into your marriage. The only thing a prenuptial agreement can’t do is settle issues of child custody and child support, which must be settled during the divorce process so that the current best interests of the children may be evaluated. Approaching a home sale after divorce can be stressful — and cause a lot of unnecessary headaches. And, that’s why I’m here. My job as a real estate agent is to take away some of that stress and guide you in the next steps of your journey. If you’ve decided to sell your home — or even if you’re still on the fence — consider this book your comprehensive guide to navigating the home-selling process after a divorce. It contains proven tips and strategies that can help you get the most money for your home if and when you do decide to sell. Having assisted numerous individuals post-divorce, I invite you to discuss your specific situation and real estate aspirations. Trust me to facilitate this transition, ensuring a smooth experience for you. I’m fully equipped to help you through this process and promise to do everything I can to make it as seamless as possible.

This book serves as an in-depth guide to the home-selling

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journey after divorce, offering insights to maximize your property's value. ***Disclaimer: The information provided in this book does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available here are for general informational purposes only.

Amir Mirbolooki, Real Estate Broker Royal LePage Your Community Realty, Brokerage Cell: 647-447-8887

www.TorontoYorkHomes.com TorontoYorkHomes@gmail.com.

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CHAPTER 1 Your Home And The Family Law Act Of Ontario Divorce is not easy. Even the most amicable separations are plagued with disappointment, lack of communication, and failed expectations. In the best-case scenario, two people who are dissolving their union will work together to resolve their differences productively and part ways, hopefully without drawing blood. Unavoidably, though, during the process, you and your spouse’s emotions will fall prey to a myriad of changes as the marriage, family, and shared assets are legally separated. Adding to the stress is the sale of the family home, which is typically the largest asset of the marriage. This can evoke tremendous emotions: sadness, anger, sentiment, and disappointment, to name a few. The combination of the stresses of the divorce with the sale of the family home requires patience, diligence, and great personal fortitude. With the help of seasoned, experienced professionals — such as lawyers and real estate agents — divorcing couples can successfully move through this challenging phase of their lives and on to their future. The phrase “and this, too, shall pass” sounds like a bad cliché in a moment like this, but it's one worth keeping in mind. No matter how bad “it” gets, it will eventually pass. The divorce will become final. The house will sell. The children will adapt, and life will go on. This is where that personal fortitude will come in handy. Decisions regarding the family home are not only emotional but mired in legal maneuvers and decisions as well. Divorce laws vary based on location, so licensed legal counsel is your best source of 2

information on how to protect both parties' interests.

Many questions arise when trying to sell your home during a divorce. What needs to be done to ensure a quick and profitable sale? Who will choose the Realtor? When is the best time to list a home? Who bears the financial responsibilities of the sale? You can proactively allay your fears and clear up misconceptions by doing your due diligence and researching what to expect throughout the selling process. Every divorce has a unique set of circumstances. This book is not intended to be a legal guide or to dispense legal advice but to provide you with a source of information regarding the sale of your marital real property. Becoming familiar with some real estate terminology and options will give you a better understanding of your situation and confidence that, indeed, “this too shall pass.”

WHAT ASSETS ARE DIVIDED IN DIVORCE?

All property acquired between the date of marriage and the valuation/separation date is marital property and, as such, subject to Ontario’s family property division regime, so long as they still exist at the date of separation. Property includes things like real property (homes, land, cottages, vacation properties), personal property (jewellery, furniture, art), vehicles (cars, trucks, motorcycles, recreational vehicles), investments, pensions, outstanding loan amounts owed to one of the spouses and intangible property such as intellectual property. Married couples have to share the value of their property if they separate or divorce. To share the value of their property, they should calculate their net family property (NFP) y (NFP). To calculate NFP, each spouse adds together all assets and subtracts all debts that he/she had at the end of their relationship (separation day). Then they subtract all

assets less all debts they had on the day they married.

Then, the spouse with the higher net family property (NFP) owes the other spouse half of the difference between the NFPs. This is called equalization payment.

For instance if:

Spouse A's NFP = $100,000 Spouse B's NFP = $40,000 Spouse A's NFP – Spouse B's NFP = $60,000 $60,000 divided in half = $30,000

Equalization Payment: Spouse A pays $30,000 t s $30,000 to Spouse B

Some property may be excluded, such as inheritances or gifts, so long as they cannot be traced to the matrimonial home. You must share the value of the family home, even if: • one of you owned the home before you got married • you received it as a gift • inherited it

FAMILY LAW ACT OF ONTARIO

The Family Law Act is a statute enacted in 1990 by the Legislature of Ontario that regulates spouses' and children's interests in assets, support, succession, prenuptial arrangements, separation agreements, and other family law matters. The court determines who receives what, based upon a variety of factors, such as the relative earning contributions of the spouses. In other property areas, all income and assets earned or acquired during the marriage are considered to be equally owned. This applies to all debts, no matter who created the liability. In a

divorce action, these will be divided equally (Equalization).

In addition, there are mutual court orders that automatically protect marital property. An automatic temporary restraining order prohibits spouses from selling, transferring, or borrowing against a property when a divorce is filed. Again, any orders should be discussed with your attorney, as this protection varies by region. If you get divorced when you are married, the rules are different from the dissolution of any relationship seen as a common-law relationship. Divorced spouses are entitled to certain assets, and support as seen in the Family Law Act. In a common-law relationship, you can't get a divorce because a divorce is only for married people. For the common-law relationship, it is more like separation or dissolution of the relationship.

MATRIMONIAL HOME

The term "matrimonial home" refers to any residence that is owned and “ordinarily occupied” by the spouses and their families on the day of separation. Provided it is a family residence, this can include any type of housing including condominiums and mobile homes. Note that there can be more than one matrimonial home: as long as it meets the legislative definition, even a second home such as a frequently-used family cottage can constitute a matrimonial home which is subject to the Act’s special rules. In Ontario, the matrimonial home belongs to both spouses regardless of whose name is on the title or the mortgage. The day you get married, the home that you live in automatically becomes owned by both spouses, therefore it is also divided between the spouses when you separate or divorce. It is important to note but not to burst anyone’s bubble that Common-law partners cannot have a matrimonial home.

In Ontario, property acquired during a marriage must be split equally when a marriage ends for any reason. Anyone’s name could be on the title of the property, but according to the law in Ontario, the marital home is a property belonging to both spouses. Both spouses have the equal right to stay in and continue living in the matrimonial home, until the home is sold, or a judge grants a court order ordering one spouse to move out. If a married couple becomes legally separated while living in the matrimonial home, and one spouse moves out, the other person will not be allowed to legally change the locks. Also, under Ontario’s Family Law Act, the matrimonial home’s unique legal status means that both spouses have an equal right to possess the matrimonial home. The right to equal possession of the matrimonial home continues after the spouses are legally separated, unless or until both parties reach a separation agreement or a family court judge grants a court order, establishing that one spouse is exclusively entitled to maintain ‘exclusive possession’ of the matrimonial home pending a family court trial. Under Ontario’s Family Law Act, both spouses are allowed to stay and live in the matrimonial home until a formal resolution is reached regarding the possession of the matrimonial home. In the event that one spouse moves out of the matrimonial home, they will not be entitled to come-and-go from the matrimonial home at will. If they will be coming or going from the matrimonial home, they are required to provide the other spouse living in the matrimonial home, with reasonable and adequate notice of any intention they might have to return.

When couples separate in Ontario, typically the matrimonial home is sold – either to one of the spouses or to a third-party buyer. Usually, there are two options available to the spouses regarding the home: 1. One of the spouses can buy out the other spouse's share in the home and remain in the home. 2. Both spouses can put the home up for sale and divide the equity in the home. In family law disputes, a court can order the sale of a matrimonial home unless the party who resists the sale can establish a prima facie case that they are entitled to a competing interest in the home under the Family Law Act. When a home is sold under court order, the court can also order that the proceeds be placed in trust and not be accessible by either party until an agreement is made between the divorcing couple.

COMMON-LAW COUPLES

The law gives different rights to common-law partners depending on how long they've lived together or whether they have a child together. But, they do not have the same rights to properties as married partners share. In Ontario, a couple is considered common law if they meet one of 2 requirements: • They’ve been living together in a conjugal relationship (sharing a home, finances, and an emotional and sexual relationship) for at least 3 years. • The couple has a child together (by birth or adoption) and has lived together for a year.

RIGHTS TO PROPERTY AS COMMON-LAW COUPLES

• Common-law couples do not have statutory property rights in Ontario. • A common-law spouse does not automatically have the right to stay in the family residence if it is not in his/her name. • If one common-law spouse owns the home, he/she can sell or mortgage it without the other’s spouse’s permission. IS THE HOUSE THAT I OWNED BEFORE GETTING MARRIED, A MATRIMONIAL HOME? Under the law in Ontario, a couple’s property is not divided upon separation, but rather, the value of that property and more specifically, the growth in value of the property that spouses share is divided. What this means is that if the title to the matrimonial home is in your name (perhaps you owed it before the marriage), it stays in your name (subject to some claims your spouse could make if he or she made significant contributions to the property), but your spouse has a right to claim a share in the value of a matrimonial home as part of an equalization payment dividing property. So, without a marriage contract, a couple will share whatever value is in the matrimonial home.

How Do I Protect My Assets Before Marriage In Ontario?

The easy answer is to protect your assets that were established before becoming married by having a prenuptial agreement executed. This clearly establishes what you owned prior to being married, and assuming it is executed and signed properly, would always stand to protect those assets.

12 FACTS ABOUT MATRIMONIAL HOMES

1. It doesn’t matter whose name is on the title. If you both lived there before the date of separation it is the matrimonial home. 2. You cannot change the locks. Typically, both spouses have an equal right to possession of the matrimonial home after separation. 3. Once your spouse moves in, the house is instantly considered the matrimonial home. It doesn’t matter if you bought the house before you were married. 4. You are responsible for the mortgage, even if you don’t live there. If your name is on the mortgage you need to ensure it gets paid. 5. Inheritance is exempt UNLESS you put the money into the matrimonial home. 6. You will pay land transfer tax if you buy out your spouse’s share of the matrimonial home UNLESS you have a proper separation agreement in place. 7. If you owned more than one home (or a cottage, etc.) it may also be considered a matrimonial home. 8. The matrimonial home is always divided unless you have a marriage contract that deals with the matrimonial home differently. 9. You are not allowed to mortgage, refinance, or place a line of credit on the matrimonial home without your spouse’s written consent. 10. If you are common-law, you do not automatically have the same rights with regard to a matrimonial home. In Common Law, whoever’s name is on the title owns the home. 11. A property that was gifted to you, or inherited is NOT exempt from division. If you and your spouse lived there, it is considered the matrimonial home and will be divided between you both. 12. If can’t agree on what to do with the matrimonial

home, you may apply to the court for an order of partition and sale . If granted, the court will order the house to be sold and the proceeds to be split.

Neither spouse is allowed to sublet, rent, sell, refinance, mortgage or place a line of credit on the matrimonial home without the other spouse’s written permission. If both parties are still on an existing mortgage, then from the Bank’s perspective both are responsible for the payment of the mortgage and all taxes. The unique protected legal status granted to the matrimonial home under Ontario’s Family Law Act means that one spouse cannot do anything major to the matrimonial home without receiving the other spouse’s written permission first. The decision to sell the matrimonial home must be made jointly by both spouses. However, if one spouse agrees to sell the matrimonial home, but the other spouse does not cooperate with efforts to sell the matrimonial home, an application with the court to make it possible to sell the matrimonial home needs to be initiated.

KeyPoints:

Property Division: The Key Differences • Married Couples: Under the Family Law Act, when a marriage ends, there's an "equalization of net family property." This means that any value acquired during the marriage and still existing at separation is divided equally between the spouses. The matrimonial home, regardless of who bought it or holds the title, is treated uniquely. Both spouses have an equal right to stay in the matrimonial home unless a judge decides otherwise.

• Common-Law Partners: Common-law partners in Ontario do not have the same automatic rights to property division as married couples. There's no

equalization payment. If you separate, each partner keeps what's in their name. However, if one partner contributed to the other's property, they might be entitled to a portion of it. This often requires legal action and proving the contribution. The Family Law Act (FLA) is the primary piece of legislation governing property division for married couples in Ontario. It sets out the rights and obligations of spouses concerning property they've acquired during their marriage and its division upon separation.

Key Principles of the FLA

1. Equalization of Net Family Property: The FLA operates on the principle that marriage is an economic partnership. Upon separation, the value of any property brought into the marriage and still existing is shared, ensuring both parties leave the marriage on equal financial footing. 2. Matrimonial Home: Unique among assets, the matrimonial home holds special status. Regardless of who purchased the home or whose name is on the title, both spouses have an equal right to the home. 3. Valuation Date: This is the date when the couple separates, and no reconciliation is possible. The value of assets and debts on this date is used to calculate the equalization payment. 4. Exclusions: Certain properties, like gifts, inheritances received during the marriage, and damages for personal injuries, are generally excluded from the

equalization process unless they are used towards the matrimonial home.

Common-Law Partners and the FLA

As highlighted in Chapter 1, common-law partners aren't covered by the FLA's provisions for property division. Instead, they might rely on principles of trust law, like constructive or resulting trusts, to claim a share in property not in their name. Contracts and Agreements • Marriage Contracts: Married couples can draft an agreement that outlines how they wish to divide their property upon separation, deviating from the FLA's provisions. • Cohabitation Agreements: Common-law partners can create an agreement detailing the division of their property upon separation. All discussions regarding mortgages or the title of the property should be conducted with your legal adviser. This book intends to provide information regarding the sale of your home within the framework of a divorce; it is not intended to provide legal counsel or advice.

CHAPTER 2 Be Prepared

Step one in successfully handling the disposition of the family home in a divorce is to have a clear understanding of your financial standing. Knowing your precise financial situation throughout the emotional turmoil of divorce will keep you from making snap decisions that could severely impact your financial position. It is crucial to know who bears legal financial responsibility for making the mortgage payments. If both spouses are listed on the mortgage agreement, they are equally obligated to the lender, whether or not their name is listed on the property title. Removing a party from a property title does not relieve the financial obligation of that party. Two signatures on the mortgage mean two responsible parties. This also includes the homeowner’s insurance policy. It is important to know who the beneficiary is and if both parties are insured. For the previously stated reasons, it is critical that you collect and immediately provide your lawyer with all information regarding your home insurance, property taxes and liens, mortgage and marital debts, and marital assets (NFP). The more prepared you are to face your financial future, the more secure you will be moving forward. Knowing where every dollar has to go will help you make better decisions and avoid adding undue additional stress to the already uncertain future that accompanies divorce. Knowing where you stand financially greatly influences your decision to keep, sell, or buy out the family home. There are many considerations for each option, and they all require a significant amount of due diligence, financial planning, and difficult 14

decisions.

Affordability and objective forethought are the keys to your decision-making process. Poor decisions can affect you and your former spouse, long after the divorce is finalized.

KEEPING THE HOUSE

When divorcing couples have school-age children, they often decide to allow one spouse to remain in the home to avoid disrupting the children’s routine, school attendance, and social relationships. This can be accomplished with written agreements between spouses. Equitably allocating home expenses and mortgage payments by percentages or mutually agreeing on the delegation of financial responsibility will allow your family to focus on what matters most: the children. A clear-cut, signed agreement drawn up by a mediator will help avoid contention surrounding responsibility for the maintenance, expenses, and future sale of the family home, whether it be to the spouse who remains in residence or an outside buyer. This is why it is important to know your financial position and how much each spouse can contribute. If one spouse fails to make their share of payments, it can negatively affect both parties’ credit ratings and complicate the later sale of the home. If each spouse has provided appropriate evidence that they have sufficient resources to maintain this type of arrangement and are willing to participate in the agreement, this may be the right path. Some couples choose to reside in the home as roommates for different reasons. It might be that neither spouse is able to afford both their share of the home and a new residence, or it could be to decrease the abruptness and difficulty of the children’s transition. If, later, one leaves, that person will have increased financial obligations in finding a new place to live, so give serious

thought before choosing this option.

Be aware, though, that some spouses are tied to the home, not only by their children but by their own emotional investment. The house represents stability and a happier time and provides shelter from the trauma of divorce. In keeping it, they may feel more in control of their situation. Some may think that keeping the home makes them the “winner,” despite the financial hardship it can bring. It is difficult enough to deal with a divorce without later learning that unforeseen or unbudgeted expenses have crept in and taken a big bite of an already tight budget. Be realistic about what is affordable.

SELLING THE HOUSE

For most couples going through a divorce, selling a house is the best solution. Selling a home under any circumstances takes a great deal of time and effort, so the addition of the emotional stress of divorce can make the task overwhelming.

LEGALITIES

The termination of marriage requires the division of real property. The marital property belongs to both parties, regardless of whose name is on the title, and each party is entitled to their equitable share. Some couples have a legal agreement beforehand, which provides a simple solution to property division. Some couples are able to use mediation to divide assets, but others are unsuccessful in negotiating equitable terms and must turn to the courts to rule on the division of their real property. Again, this book is in no way a substitute for professional legal advice. Always consult your lawyer regarding the division of real property. Preventing default on the mortgage is the most common reason divorcing couples choose to sell the family home. Monies

budgeted for the upkeep of the home, property taxes, home insurance, home security, and house payments may or may not still be available when couples split.

THE EMOTIONAL SIDE OF SELLING YOUR HOME

If the marital home has been the hub of happiness and family life, it may turn out to be a constant reminder of what once was and is no more. The good memories the home represents are now tainted by the unhappiness and pain of divorce. No matter how strong sentimental value may be, often the best option is to sell the house and move on. That way, both spouses get some money to make a clean break and start fresh. Once you’ve decided to sell, there is a long “to-do” list — a list that is difficult under the best of circumstances and only made more difficult with the added emotion of divorce.

LIABILITY

The liability of keeping a home may be the best reason to sell. There are various ways to keep a house with one spouse remaining and the other departing, but they all carry risks and challenges. An equity buyout occurs when one spouse keeps the asset, and, in exchange, compensates the other for his or her share of the equity.

THE BUYOUT

If one spouse is in a financial position to remain in the home, it may be easier to buy out the other’s share of the property, which would entail refinancing the home. The real challenges come in working out the details. There could be disagreement about the selling price or the appraisal value. Or, the equitable division of the property may not meet expectations. Other questions that arise include the possibility of giving up marital property rights in exchange for other assets, like investments. The ex-spouse may

lose out on future appreciation of the house. It is crucial to know that questions like these will arise when it comes to the division of property in a buyout situation and that you have to be prepared to address them. Refinancing the home in one spouse’s name means not only settling the previous loan but paying the selling spouse their portion of the buyout. As an example, if the principal balance owed is $100,000, and there’s another $100,000 in equity, one- half of the equity ($50,000) would be due to the selling spouse, and $100,000 would be required to pay off the principal. The refinanced loan would have to be at least $150,000. If the house value has been appreciated, who is entitled to the equity? What if the property is appraised lower than the current loan? All scenarios must be considered before deciding on a buyout. Again, knowing your financial standing before filing for a divorce is paramount.

CO-OWNERSHIP

If you or your spouse want to keep the house and buy out the other, but need time before this can be accomplished, co- ownership is a possibility. However, maintaining a clear channel of communication with the ex-spouse is a major part of co- ownership and one of the most difficult to achieve because it requires a lot of mutual trust, something that is typically lacking in most divorce scenarios. The goal is to move forward, so any concessions made between the spouses benefit not only both parties but especially the kids. Maintaining a civil, business-like relationship in front of your children will help them maintain stability and keep them from moving away from their homes when they’re already adjusting to a lot of change. If one of the spouses can occupy the home with the children and make the mortgage payments until they can manage a buyout and become the sole owner, it’s a win-

win. The drawback to this type of arrangement is the negative consequences if the spouse in residence defaults on mortgage payments. Both parties are still responsible, and missed payments will affect both spouses’ credit scores. Moving forward with a new life can be tricky in a co-ownership agreement because consistent communication is necessary, and that isn’t always (or even usually) easy for divorced couples. House payments, insurance premiums, utilities, and necessary repairs are guaranteed financial obligations. What if the utilities are shut off due to nonpayment? What if the home heating and air-conditioning system terminally fails? What if you moved two hours away and your ex-wife needs you to help with a fallen tree because she can’t afford to pay someone to dispose of it? What if the resident spouse has to move out because he/she cannot afford to stay? What if the resident's ex-spouse files for bankruptcy and risks losing the house? These are all very real possibilities. Co-ownership must be considered carefully, and a knowledgeable lawyer dedicated to protecting your family’s well- being will be your best source of guidance on the complexities that may arise. An agreement can be created to address all the obligations mentioned previously and protect both parties at the same time. No matter the option you choose, the mortgage must still be paid. Selling is the only alternative if neither of the spouses can afford the home on a single income. A short sale is possible if the home is going into foreclosure. You can come to an agreement with your lender to sell the home for less than is owed. Walking away from your home and mortgage is not tolerated by the courts. The lender will add to the complications of your divorce by taking legal action to receive the remaining balance.

You can find yourself in court if you or your spouse is

uncooperative or is demonstrating an obstructionist attitude, which will cost more time and more money. Many divorcing couples end up using up what equity they had in their marital property on legal and court fees. Refusing to sign papers to sell the home or refusing to help pay for the mortgage will give a judge no other option than to order the home sold on the court’s terms. When a divorce action is filed, an automatic temporary restraining order can be issued to prevent spouses from selling or borrowing against the marital property. Discuss this option with your lawyer to make sure your stake in the marital property is protected. Less than one-third of divorces end up in court due to disagreements over property division, but if you’re in that unfortunate one-third, going to trial doubles the cost of the divorce. Many divorcing couples who want to limit legal fees as much as possible, as well as the time it takes to settle, choose to sell their home. Surveys show that couples who resolved their property issues without court intervention completed the divorce in under a year. Those who could not agree and went to trial had to wait an average of 15 to 16 months. Some provinces require divorces to be resolved within a year, but dockets are full in many provinces, which causes long wait times for a divorce trial. While you’re waiting for the trial date, the mortgage still has to be paid, as well as utilities, insurance, and property taxes. The rest of this book will expand upon the benefits of marital agreements that help sell the home, the importance of having realistic expectations regarding the value of your home, and how choosing a Realtor® who has experience working with divorcing couples may be your greatest asset in the sale of your home.

Taxes, Capital Gains and Property Division

1. General Rule: Transfers of property between spouses because of a separation agreement or court order are usually not subject to capital gains tax. The asset's original acquisition date and cost carry over to the receiving spouse. 2. Exception: If the transferred asset is later sold to a third party, capital gains tax may apply. It's essential to be aware of the adjusted cost base of the asset to calculate potential capital gains accurately. 3. Principal Residence Exemption: Only one home can be designated as a principal residence for tax purposes. If both spouses own homes, they must decide which one to designate, impacting potential capital gains tax upon sale. 4. Utilize Losses: If one party has capital losses, they might consider selling an asset at a gain to offset the loss, reducing the overall tax burden. 5. Consider Timing: Timing the sale of assets can impact tax liabilities. For instance, selling an asset in a year with a lower income might result in a lower tax rate on capital gains. 6. Seek Expertise: Engage tax professionals or financial planners familiar with divorce scenarios. They can provide tailored strategies and ensure compliance with tax laws.

Case Studies - Navigating Complex Property Division Scenarios

Understanding the theoretical aspects of property division is essential, but real-life scenarios provide invaluable insights. Let's delve into some actual cases from Ontario to glean lessons and best practices.

Case Study 1: The Matrimonial Home Purchased with an Inheritance

Scenario: Jane inherited a substantial amount from her grandmother. She used this money to purchase a home where she and her husband, Mark, lived for 15 years. Upon divorce, Mark claimed a 50% share of the home's value. Outcome: The court ruled that since the home was purchased with Jane's inheritance and was the matrimonial home, its value should be equally divided, despite the source of funds. Lesson: Inheritances used towards a matrimonial home lose their excluded status. Couples should be aware of this when using inheritances or gifts to purchase or improve a matrimonial home.

Case Study 2: Business Valuation and Division

Scenario: Raj owned a successful tech startup before marrying Nina. During their marriage, the business grew exponentially. Upon divorce, determining the business's value and how much Nina was entitled to became contentious. Outcome: An expert was hired to value the business. The court determined that while Raj had started the business before the marriage, its significant growth during the marriage meant Nina was entitled to a share of its increased value. Lesson: Business assets can be complex to value and divide. It's crucial to involve experts and consider both the business's initial value and its growth during the marriage.

Case Study 3: Pension Division Complications

Scenario: Liam, a teacher with a defined benefit pension plan, divorced Clara after 25 years of marriage. Clara, unfamiliar with the pension division, initially overlooked its value.

Outcome: Upon legal consultation, Clara realized the pension was a significant asset. An actuary valued Liam's pension, and Clara received a portion reflecting the years they were married. Lesson: Pensions, especially defined benefit plans, can be significant assets in property division. It's essential to understand their value and seek expert valuation.

Case Study 4: Debts and Liabilities

Scenario: Sophia and Alex, both with substantial debts at the time of their marriage, acquired more during their relationship. Upon separation, they disagreed on how to divide these liabilities. Outcome: The court considered debts from both before and during the marriage. They were divided based on who benefited from them and the couple's ability to pay. Lesson: Debts and liabilities are as crucial as assets in the property division. Clear documentation and understanding the purpose of each debt are vital.

CHAPTER 3 Marital Settlement Agreement eement

One of the most productive methods for couples to move forward with a divorce and on with their lives is to disconnect emotionally and handle the sale of the home in a businesslike manner. Because the marital home is usually the greatest asset in a marriage, it is also the greatest liability. You must give a lot of serious thought to securing settlement terms that protect both parties, especially the spouse who is departing the home. When you enter into your marital settlement agreement, your lawyer should specify who is financially responsible for the mortgage, the homeowner's insurance, utilities, and the upkeep of the marital home. If the spouse occupying the marital home is responsible for listing, showing, and selling the home, the other spouse may be obligated to pay part or all of the mortgage, as well as contribute to the upkeep of the home. If the occupying spouse shows little effort in getting the house sold, the marital agreement should provide a timetable for the sale of the home. The marital agreement needs to include provisions outlining the steps to be taken if the house cannot be sold within a specified time or if one spouse fails to meet any financial obligations. Consult your legal adviser for contingencies that are specific to your situation. Additional expenses may include repainting, landscaping, or replacing appliances or carpeting. There should be clear direction on how to handle the unexpected while in the process of selling the home — for example, if a home inspection reveals a cracked foundation or termite infestation. Ex-spouses sometimes agree to a fixed amount of time to share expenses before the sale of the home. Quick decisions can be damaging, 24

especially when it comes to co-ownership or one spouse occupying the home until it sells. By keeping emotions at bay while making important decisions and focusing on what needs to be done to sell your home, you and your ex-spouse can move on faster.

REASONABLE AND REALIS LE AND REALISTIC EXPECTATIONS

Since the home is one of the most valuable marital assets, dividing the property between a couple in the throes of divorce can be a major source of contention. If you have other properties, such as a vacation home or investment properties, those will also have to be assessed and assigned a monetary value. In order to divide equitably, or equally, as the case may be, you will need to know the precise value of your property. When it comes to the marital home, there are several common valuation methods available to determine the value. These are used in property settlements and may differ from what you perceive as your home’s worth.

COMPARATIVE MARKE TIVE MARKET ANALYSIS

Your real estate agent will provide you with a comparative market analysis, or CMA. This is an in-depth review of your home’s worth in the current market, based on the recent sale prices of comparable homes. Any differences, such as the size of the lot or value-added items like a swimming pool, are taken into consideration and the value is adjusted accordingly.

THE COST APPROACH

The cost approach is based upon what it would cost to reproduce your home new, minus depreciation and obsolescence. Would any person buy the property for a cost greater than the value of the land and a structure with an equal appeal?

PROFESSIONAL APPRAISAL

A professional appraisal for the valuation of marital property is required when a court is dividing the couple’s assets. You should understand that when a valuation is determined, it may not include latent cost-related issues. If there are plumbing problems under the foundation or the structure has been compromised by a termite infestation, these situations will affect the sale price. It is advisable to have a home inspection conducted in an all-encompassing examination of the condition of the home. It will be invaluable in discovering the universal condition of the home. The inspection will cover electrical wiring, plumbing, roofing, insulation, as well as structural features and could uncover issues invisible on the surface. This will give you a realistic idea of what to expect when you sell your home. Most buyers require home inspections to eliminate any questions regarding your home’s integrity. Typically, a buyer will order and pay for a home inspection. However, doing this yourself in advance offers two advantages: 1. Both spouses are made aware of any underlying problems with the home, and arrangements can be made to split the cost of repairs. 2. Buyers who are interested in the home will have an additional layer of security in knowing the integrity of the home, without having to put out the money themselves for the inspection. It may cost you a few hundred dollars upfront, but buyers appreciate having this information available, and that goes a long way toward building a relationship of trust and willingness to do

business.

FINDING THE RI G THE RIGHT REAL GHT REALTOR®

Choosing the right listing agent is important. As obvious as this might seem, selecting the best real estate agent for you can be difficult. Most people personally know a real estate agent but don’t jump headlong into working with friends who 1) may not be experienced at working with couples in the midst of divorce or 2) may not be impartial to both spouses. Some Realtors® focus specifically on helping people who are going through a divorce. They are known as Real Estate Divorce Specialists. If the house is handled improperly during the divorce, the result could be that one or both spouses end up ineligible to qualify for a mortgage for many years. A real estate professional experienced in the divorce niche can provide clients with step- by-step guidance to protect themselves legally and financially. What defines a “good” real estate agent? That often depends on your particular circumstances. For someone selling a home during a divorce, it means finding someone with experience dealing with divorcing couples and who is an expert negotiator — not only between seller and buyer but between seller and seller, who are not always on the same page or even on speaking terms with each other. Some Realtors® prefer not to take on listings with divorcing couples because the process is often more complex and labour-intensive than a standard real estate transaction. Not every real estate agent is equipped to handle the complexity of property issues that come with the division. Most of all, you have to like your agent. You might be spending a lot of time with him or her over the next few months. This has to be a person who is calm, cool, and collected is sensitive to the circumstances, and can move your home, no matter the current market. He or she must relate well with both spouses and cannot

show any bias or judgment. You want someone whom you feel listens to your priorities, is patient with the situation and can be trusted to deal fairly and communicate fully with both parties. The best Realtor® is one who will work effectively with both parties, despite conflicts of interest and strong emotions coming from both sides. An experienced Realtor® won’t run at the first sign of an emotional outburst, shy away from awkward meetings between soon-to-be exes, or hold exclusive meetings with one party over the other and will instead provide a neutral ground for interactions. Be sure your Realtor® keeps the details of your divorce out of sales conversations since some buyers equate divorce with “desperate to sell” and will attempt to leverage that information in negotiations to get a lower price. You don’t have to seek out a certified Real Estate Divorce Specialist, but when you look for a Realtor®, don’t be shy about asking questions about their experience working with divorcing couples. You must be able to wholeheartedly trust your Realtor®. Listen to how they talk about previous clients. This is usually an accurate indicator of how you will be treated. Look for discretion and empathy. Most Realtors® work with buyers and sellers who don’t know each other, not with divorcing couples who may or may not be adversarial with one another. The best Realtor® for you will be impartial and understand the complex nature of divorce. Make sure you pick a good listener. No two divorces are alike, and your Realtor® should be able to help sell your home without taking sides. Some Realtors® are trained in mediation. Since you and your spouse will both be involved in the selling process, look for an exceptional communicator who knows how to keep everyone on the same wavelength. Suitable agents are focused on being objective and are unaffected by emotional outbursts from either party.

Not only do you want a Realtor® with divorce experience who is a good listener/communicator, but you also want one who is genuinely concerned about your situation. They should show an interest in helping both parties experience a quick and strong rebound in their finances. They should also be knowledgeable about the local market, in order to price your home correctly from the start.

Here are some traits to look for when hiring an agent.

• Listing price-to-sale price ratio — What is their success rate for sales? • Current — Is the agent up to date with the latest housing trends so he/she can serve you effectively? • Connected — Does the agent belong to a network with the necessary contacts to assist in every phase of the sales? This network should include home inspectors, quality service people, and other brokers. • Knowledgeable — Is the agent familiar with the current market and able to price your home strategically? Does she/he know the unique features of your neighbourhood to distinguish your home from the competition? Does she/he know what to highlight in your area to attract buyers? • Organized — An agent must pay close attention to your specific needs, communicate well, and be quick to follow leads. • Personable — An agent who is sincerely interested in helping you will go the extra mile with a smile. They must be able to sell themselves to you, as well as sell your home to a buyer. • Passionate — Some agents treat their job like a hobby or

just a way to earn extra income. Find an agent who is passionate about what they do and loves their job. • Tenacious — Successful agents possess a strong work ethic. They are efficient and take advantage of time-saving tools that help sell your home. • Honest — Professional real estate agents build their reputation on high standards of business practices. • Self-motivated — Real estate agents are commission-only business people. Successful agents work hard because what benefits their clients benefits them. • Creative — Sometimes it takes creativity to properly showcase a home, develop engaging content, and negotiate a sale. An agent who can quickly address any marketing need is an asset to you. • Tech-savvy — Agents well-versed in the latest technology for marketing homes should have a website, social media setup, user-friendly home search options, and quality presentations online with high-resolution images of homes, as well as videos and slideshows. A professional Realtor® has to wear many hats. They must be proficient in marketing, negotiation, consultation, the legalities of real estate, property taxes, and, most of all, gaining the trust of their clients. It is to your advantage to hire an agent who understands your unique needs while you work through your divorce. Once you’ve selected your Realtor®, remember not to take out your stress and anger on him or her. He or she has nothing to do with the divorce and is trying to help you. Take his or her advice. They are professionals and know more than you do about selling your home.

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