When divorcing in BC, couples typically sell their home and split the profits after paying off the mortgage. The process involves setting a fair price, listing the property, and agreeing on the best offer. Legal guidance helps ensure fair division and a smooth sale.

When homeowners divorce, they must decide what to do with their home. Asset division is almost always a given of a divorce. For homeowners, that involves dealing with the house. A divorcing couple has three clear options.

Option One: Sell the Home

The most simple approach: is to sell the home and split the profit. This is the most common choice for most couples when they split up.  Both partners sign a listing agreement. Both pay the single realtor fee. The realtor works on behalf of both partners to satisfy their collective desire to liquidate the home.

It’s common for both partners to move out and obtain housing otherwise. Often, if the couple have kids, the primary caregiver will retain the house until the sale, while the other partner lives on their own. When the home clears, the profits are split between both partners after the balance of the mortgage is settled up.

A realtor helps to set a fair price. He handles showings and manages offers as they come in. When the offers come in, the couple will need to work together to agree to the best offer in terms of closing date, sale price and the other aspects of a given offer. A realtor will work with the couple to set the price of the home compared to other properties of a similar house age, size, rooms, lot size, etc.. There are no apple-to-apples comparisons in house sales. Likewise, the market is perpetually moving. What a comparable property sold for three months ago may not fetch the same price possible today. Again: an experienced realtor will set a realistic and attainable price target.

Steps to Sell Your Home During Divorce

• Agree to sell and sign listing agreement
• Set market price with realtor
• Prepare the home for showings
• Review and agree on offers
• Split profits after closing

A quick close can allow the couple to untie the knot quickly, but if one of the partners and the extended family are still in the home, it could make the exit hectic. A longer close could both be a hard won concession and it will draw out the conclusion of the sale. It’s important to weigh out the pros and cons.  Dale Sheppard has been a part of over 1600 home sales. If a couple wants to talk about selling their home, contact Dale.

Option Two: One partner Keeps the Home

Simply put: one partner keeps the home. The other partner moves out. In most cases, there is still a mortgage. The partner who remains must show their bank that they can carry the mortgage alone. That can be a big hurdle to clear. Lenders in British Columbia will check income, credit, debts, and current mortgage rules. If the lender agrees, the partner who stays must refinance the mortgage in their own name.

A buyout requires a fair value for the property. Most couples hire a certified appraiser to set this value. The appraisal helps both people see the worth of the home and the size of the buyout.

A buyout usually works like this:

• The home is appraised.
• The remaining equity is calculated.
• Each spouse’s share is confirmed.
• The partner keeping the home refinances the mortgage and pays the other spouse their share.

Legal advice is important in British Columbia because property division rules can affect the share each partner receives. A lawyer can confirm rights under the Family Law Act, explain how exemptions work, and prepare the required separation agreement. This agreement often must be completed before lenders approve the refinance.

The partner who takes the home gains stability and keeps a familiar place. They also take on full responsibility for all costs. This includes mortgage payments, taxes, insurance, repairs, and any future market changes. They also lose the benefit of the other spouse’s income.

A buyout works best when:

• One spouse can qualify for the mortgage.
• Both people agree on the value.
• The buyout amount is clear.
• The refinancing process moves smoothly.

If the partner staying cannot qualify for a new mortgage, the buyout may not be possible, and the couple may need to sell the home. Couples often compare both options before making a final choice.

For many people in British Columbia, this option offers a clear path forward after a separation. It allows one spouse to keep the home while giving the other spouse a fair share of its value.

Option Three: Rent the Home  

Both people stay on title. You keep ownership and turn the home into a rental.
You lease the home to tenants and collect rent. You share the income based on your agreement.
You also share the costs. This includes mortgage payments, taxes, insurance, repairs, and property management fees.

Many couples choose this option when they want to delay a sale. Some wait for a stronger market. Others want to reduce disruption for children. The decision must be mutual. If one person disagrees, this option will not work.

Shared ownership after separation adds pressure. You must agree on money, repairs, access, and timing. You must respond to tenant issues. You must share decisions that affect the value of the home. This option requires steady communication. It also delays a full financial break, which some people find difficult.

Your Responsibilities in British Columbia

If you keep a home together after separation in British Columbia, you follow clear steps:

• The estranged couple will need to tell your lender about the separation. Lenders require updated information about who is responsible for payments.
• Update the land title through the Land Title and Survey Authority of BC if legal changes are needed. For example, post divorce, some people go back to their pre-married names and the title would need to reflect that.
• The partners set clear rules for how to split mortgage payments, taxes, insurance, utilities, repairs, and rental income.
• Both partners need to keep the home in good condition. This protects equity and prevents disputes about maintenance.
• The terms need to be spelled out in a separation agreement. This agreement should guide all decisions, including how you choose tenants, how to handle vacancies, save for repairs, and decide when to sell– what circumstances would trigger a sale; and how to arrive at the decision to sell their home.

This option can protect long-term value, but it extends your financial link with your former partner. It works best for people who communicate clearly, keep records, and follow a written plan.

Which is the best approach?

It depends on your goals and what’s possible. Here’s a summary of the pros and cons:

The Financial, Lifestyle, Property and Housing Opportunities That Come With A Divorce

• A divorce can lead to one or both spouses getting a smaller and easier to manage home; or a condo.
• The proceeds of a house sale could eliminate personal debt.
• The sale of a home could allow a person to move to a more affordable community. Victoria has a bad reputation for being some of the most expensive communities in Canada. Up-island, there may be more affordable housing waiting for a newly divorced person looking for a fresh start.

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Happy Valentines Day !

February 2021:

The continued COVID restrictions in our province is wearing on us all and I wish everyone well during these times. Let’s hope things start to improve in the coming months. This weekend is a special weekend to spend time with loved ones within your bubble as we celebrate Valentine’s Day on Sunday and BC Family Day on Monday. Stay safe and have a great weekend!

The Victoria real estate market experienced a very strong start to 2021, with a total of 646 properties sold in the Victoria Real Estate Board region this January, closing in on record setting territory. The new year also began with the lowest number of listings in over 25 years, resulting in a quick jump in prices in all markets. With the enormous number of Buyers vying for the same limited supply of homes, there seems to be no signs of this Buyer/Seller imbalance changing anytime soon. The lack of inventory supply combined with the increased Buyer demand is resulting in price escalations we have not experienced before. This is great if you are a seller, but it is much harder to get into the market if you are a Buyer.

Below are the statistics for the month of January 2021.

Listing Inventory:

There were 1,321 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of January 2021, 32.5 % fewer properties than the total available at the end of January 2020, and only 3.3 % higher than the 1,279 active listings for sale at the end of December 2020. This extremely low inventory is creating increased demand in all sectors of the market, not just Single Family homes, as we are now seeing Condos generating multiple offers on a regular basis.

Sales:

A total of 646 properties sold in the Victoria Real Estate Board region this January, 57.2 % more than the 411 properties sold in January 2020 and 2.4 % more than the previous month of December. Sales of condominiums were up 83.1 % from January 2020 with 216 units sold. Sales of Single Family homes were up 48.5 % from January 2020 with 297 sold. The increased sales numbers appear to be correlated to the historic low interest rates enabling Buyers to purchase with higher mortgages, and the desire to have a safe haven during the COVID pandemic. Most of the Buyers are from within BC and the Greater Victoria area.

Average Prices:

The Multiple Listing Service® Home Price Index benchmark value for a Single Family home in the Victoria Core in January 2020 was $860,700. The benchmark value for the same home in January 2021 increased by 8.3 % to $932,000, a 1.8 % increase from the previous month of December. The MLS® HPI benchmark value for a condominium in the Victoria Core in January 2020 was $523,400, while the benchmark for the same condominium in January 2021 remained close to last year’s value at $518,800, a 0.9 % decrease. Single Family homes have been leading the price increase surge, but I believe Condos will start to increase in prices in the coming months due to the lack of overall inventory, and the fact that Single Family home prices are getting to high for most buyers. A Condo is a great alternative to get into the market.

The post Victoria Real Estate Market Update – February 2021 appeared first on Dale Sheppard.

Unlike Vancouver with their souring prices, increased sales and increased building starts, Victoria is still lagging behind like most cities across Canada. Victoria had a small increase in sales in March, but still trails the 5 year average. Listing inventory has dropped slightly, but still only 1 in 8 homes are selling per month. Overall prices are down as well, but in most regions, the drops have been significantly higher than the statistics are showing. The saving grace so far has been continued low interest rates, combined with these lower prices, creating a fairly stable Victoria real estate market over the last few years.

When will the next upswing begin in Victoria? This is a good question. Sales should continue to increase this spring and prices will probably stay fairly stable, and the market will not change much in the coming months unless we see a significant reduction in the overall listing inventory this summer. If inventory remains high, which it probably will, then the market should remain the same for the rest of 2014 and into 2015. If listing inventories are significantly lower in the summer and fall, then the result could be a shift away from a buyer’s market towards a seller’s market, which usually creates the supply demand ratio for prices to slowly start increasing. And if sales also increase, then this supply demand effect always creates further upward pressures on pricing. Eventually this will happen, and the big question is still when. Most experts are not expecting this to begin in our region until 2015 or even as far out as early 2016. We will see. However, when it happens, it usually happens fast. In the meantime, there are still a lot of good real estate deals in Victoria.

This leads me to one investment scenario. There are some really good deals in the market if you are looking for a revenue property. I will give you an example of a condo that I currently have listed for sale on Bear Mountain. It is a small 1 bedroom listed for $176,800. As an investment property, you would need the required 20% down for a second property, as this is required if the purchase is not your principle residence. This would equate to about $35,000 down, plus about $5000 for closing costs. The mortgage would be about $140,000, and the monthly payment would be about $588 if you obtained a mortgage for 2.99% for a 5 year term, with a 30 year amortization period. The strata fees are $168 per month, and insurance is about $40 per month, and taxes are about $75 per month, for a total of about $870 per month. This condo rents right now for $900 per month. Based on these numbers, this condo would actually provide a small positive return, coupled with the fact that you have a tenant paying down your mortgage each month which lowers your principal amount owing on your mortgage. As a bonus, if real estate prices increase, you are further building your cash equity in your condo which leads to a substantial equity portfolio increase over the course of the 5 year mortgage term. This investment condo would actually work. There are a number of examples like this throughout Victoria, and it has been years since you could buy a property and not have a negative cash flow on a monthly basis, so this is a good thing.

However, low prices and low interest rates will not last, as history usually repeats itself, and during the course of a natural economic cycle, which usually lasts about 7-8 years, the markets usually turn in one direction or another. And as most experts are predicting we are slowly moving towards the end of the current slowdown which started in the summer of 2008, the next upturn could be arriving sooner than later. The US economy is showing improved numbers not seen since 2008, so this usually results in a positive spin for the Canadian economy as well. Once this begins, interest rates and prices usually start to increase, and the investment property example above would immediately have a negative monthly cash flow. For example, an increase in interest rates of .50 percent alone would increase the monthly mortgage payment in the above example to about $628, which is an extra $40 per month, which turns the above scenario into a monthly negative cash flow of about $10 per month. If prices go up 5%, the same happens above. These interest rate changes can happen overnight, and the price increase can also happen quickly once the market starts improving.

Having said all of the above, I think we are still about a year or so away from seeing interest rate or price increases, so there is still a good window of opportunity for real estate deals to be made. Again, we will see…

In the meantime, here a few few links to various real estate sources that may be of interest to you:

– To stay informed on my listings and local real estate information, click on this link and hit “like”: VictoriaBCProperties

– Click for details of my Spring Newsletter:  Newsletter

– For the latest historical statistics from the Victoria Real Estate Board, click here: VREBStatistics

– Search for listing at my Victoria BC Properties website: DaleSheppard.com

Have a great Spring and I will be in touch this summer for another update.

Dale.

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