Top 10 property mistakes made during a divorce

This article is the combination of countless conversations both in-person and via email that I’ve had with family law practitioners over the past few years of running Vendorable.

We hear from lawyers that time and again clients arrive too late to their trusted advisers with either poor information, or halfway down a process that then needs to be stopped and or reversed.

With that in mind we thought we’d try to help share the top 10 mistakes that practitioners have told us about in the course of these conversations so that you can avoid these often costly and stressful mistakes!

1. Underestimating the costs associated with selling and re-purchase

Many ex-spouses assume that the total value of assets divided in half will be what they will get and plan almost from the outset to buy using this amount of money. However, the reality is that only net proceeds will be shared.

This makes it essential to get a good clear picture of all the costs associated with both the sale and repurchase of a property. Without these numbers an individual could find themselves purchasing too much house with either an insufficient deposit or insufficient income to cover the larger amount of borrowing originally thought to be required.

2. Selling a property at the wrong timing

Timing/executing a divorce around the sale of a house is just not going to happen! Life happens when it happens. That being said, selling into the typically quiet part of selling-season, or worse a bad down market, can be brutal. This is because in order to sell your property there needs to be buyers around to purchase it. Purchasers typically out in greater numbers on predictable seasonal basis. This is due to practical reasons such as the weather and school holidays / summer break. There will also be more buyers for your property when the economy is stronger as confidence around property is (more often than not) higher. If you can agree with your ex-spouse to delay the sale of a property until typically stronger times to sell — Autumn(/Fall)/Spring, or when economic conditions have improved, then that will often achieve a better result for all.

3. Going with the first agent you meet

Recency bias is real. During times of emotional / function stress it’s easy to lean on first service provider who comes along and makes you feel better by seemingly helping you to begin what can feel like an overwhelming and time-consuming process. Unfortunately, in our experience recency bias costs you anywhere from 25–50% more in commission than if you’d shopped around. This is NOT to say you should go with the CHEAPEST agent, but if you just actually check in with at least three real estate agents, you’ll get a better deal.

Legal practitioners we speak to have told us, to our surprise, that they are often the second call that a person makes when getting a divorce. That by the time they meet with a potential client for the first time individuals have almost always already spoken to a real estate agent. If you speak to an agent first, they may even try to sign you up to an agency agreement that you’re not permitted to engage in signing. This can result in unexpected fees and charges you can’t reclaim as part of your divorce. So please call your attorney/lawyer FIRST.

4. Mispricing due to time pressure

One of the biggest issues that lawyers raised with us was the feeling that clients had of being rushed! Or at least the perception of being rushed. This often meant that properties were mispriced either too high (and didn’t sell), or too low (and one spouse felt it had sold too cheaply). A good legal practitioner will help absorb pressure from your ex-spouse to move more quickly than you need to / is appropriate. That being said, tools like Vendorable are designed to accelerate tedious administration tasks to give you more time to make key decisions.

5. Spending time and $ on repairs

There is definitely a certain amount that should be spent cleaning, clearing and presenting a property for sale. BUT many practitioners have told us that one spouse over another seeks to spend more on presenting their property for sale in the mistaken belief that this achieves a corresponding higher sale price.

For certain assets this may occur, but by and large it will not. Worse still, it can delay a sale. Remember a new purchaser of the property if it’s going to be their home will want to do their “own thing”, and if they are an investor then repairs are typically tax deductible / depreciable in most jurisdictions.

6. Not seeking legal advice

Per my comment above regarding seeking advice, it is unthinkable to sell a property as part of a matrimonial asset property separation without legal advice. Why? Because even after the sale, and even with an agreement with your spouse, a court can unwind what you’ve done. There have been numerous cases recently of deceased estates (even sometimes long after separation / divorce) where an ex spouse has had a claim over an estate because there wasn’t the appropriate documentation executed. Please seek legal advice, it is especially important given the size $/% property often makes up of a marital asset pool.

7. Assuming you know ownership

What’s mine is his and what’s hers is mine, right? Well, sort of, but also no, you’re wrong / you wouldn’t even know unless you have a list of all the assets and you have copies of all the title documentation.

So that you can clearly see a couple of things:

• Who is on title?
• When the asset was acquired? (did anyone bring it into the marriage)
• Whether there’s a mortgage? (and if it was brought into the marriage with one)
• Are there are any other interests on title?

Just asserting that something is ‘yours’, or that you should get half because you’re married / have been married for ‘x years’ is not a valid assessment of ownership. A court will look at all of the above combined with intervening documentation around contribution to and separation of property assets to determine the just % ownership.

8. Using a generalist not a specialist

The phrase right tool for the right job exists for a reason. High quality legal advice in the right specialty is invaluable. Unfortunately you might feel like you don’t want to pay for it because it’s just ‘a con’ right, all legal practitioners are the same? 

Wrong. Depending upon the complexity of your matrimonial asset pool you may need to pay for specialist family law advice as well as tax advice. We’ve even seen individuals and firms need to seek out international advice to asset % claims in assets held overseas. A little bit of money upfront can save you a lot down the road when compared to having to pay more tax or needing to pay costs out of pocket post an incorrectly documented settlement.

9. Binding financial agreement obsession

These sorts of documents are always tricky. Depending on the jurisdiction you are in solicitors, legal practitioners and attorneys all agree on one thing — they’re not the set in stone documents clients think they are. Key elements such as appropriate advice at the time, drafting, declaring all assets and ultimately adherence over time to such documents can all prove vital to proof that they should be enforced. And then there’s need! Put simply, the idea that a BFA that you agreed upon before/at the time of being married will determine a property outcome 100% is not without risk, and acting on this basis without checking with your legal practitioner, from what we hear, is unwise. Seek a review with your lawyer immediately!

10. Not doing things simultaneously

Many legal practitioners describe to us a haphazard process that is executed by clients in fits and starts. They ask a client to begin something, and then the client doesn’t complete that task in its entirety, and they have to return to it. This is understandable.

Many divorcees describe a process that is tough, time consuming, often combative not collaborative, and as a result difficult to maintain consistent progress on. This is especially the case when both parties to the divorce are working full time because you’re trying to fit it in after hours. Unfortunately, this can lead to two problems. The first is additional costs with a legal practitioner who has to charge their client because they are genuinely seeking advice and return advice. The second is that the market can move up or down which creates consistently shifting goalposts in agreeing settlement in the case of the former (up), and loss of value to both parties in the case of the latter (down).

Now over to you

These are just 10 of the things that we’ve heard in our travels of running Vendorable. It is the second article in a serious of articles we are writing regarding matrimonial property separation. The first article can be read here, where we discuss our top 5 tips and considerations when selling a property.

We’d love to hear what you’ve seen or experienced.

Please reach out to us on social media either Instagram or Twitter, or directly via Vendorable.com.

Jason Weeks is the CEO and a co-founder at Vendorable.com, a platform for real estate services. He is an active voice for startups in Australia and an investor, director and advisor to a number of startups in Australia and the UK.

For over 4 years, the team at Vendorable have been assisting property vendors and landlords connect and work with real estate service providers. The platform operates in Australia, New Zealand, Canada, UK and the US and has assisted with billions of dollars of real estate transactions.