It’s hard enough entering the home-buying market as a couple -- but as a recent divorcee, it can be nearly impossible to get back in.
There are many trickle-down effects of a hot sellers’ market, and marriages are not immune. If the marriage is a little rocky, is there an incentive to divorce while the shared asset promises a huge payout? Or is the opposite true -- couples considering a split are nervous about their prospects navigating the market solo?
By the time Diana Isaac meets new clients, they’re ready for divorce -- she’s a family law lawyer and partner with Shulman & Partners LLP. Nevertheless, she sees more of the latter scenario: this market is giving unhappy couples pause, even preventing splits for the time being.
“Some of the trends I’ve noticed, we do see more people that are waiting to see what’s happening with the market,” Isaac says, particularly when school-aged children are involved.
“[They are thinking,] ‘If I have to relocate, do the children still remain within the catchment [for school]? Am I able to even rent?’ Some of these parents are saying, ‘I’m out-priced, I don’t even think I could buy within this area, and I don’t think I can rent.’
“So that becomes a driving force for why they sometimes stay put -- both parties remain under the same roof for a certain period of time.”
‘You Can’t Hold Someone’s Equity Hostage'
Exceptions to this wait-and-see trend include highly dysfunctional, toxic relationships, Isaac adds -- but generally, she thinks the market is delaying and complicating splits. Another layer is added when one party wants to cash out now.
“I am seeing more and more people saying ‘I don’t think it's a good time to sell,” Isaac says. “Now the problem with some of these situations is that when both people are on the title, and someone says, ‘We should stay here with the children and give it a year,’ and the other person says, ‘I want to sell it.’ Sometimes you’re able to get a court order. You can’t hold someone’s equity hostage.
“So there’s a balancing act, but I do see more of these requests.”
‘It’s Temporary, She Really Wants Out'
When Tammy Laber meets new clients, they are willing to work on it. Laber’s a registered psychotherapist who specializes in marriage counselling, and she believes housing markets don’t impact relationships that have disintegrated completely.
“If you’re really miserable, you get to a point where the money doesn’t matter,” she says. “But it may have an impact on the borderline cases where they’re willing to try counselling.”
Laber doesn’t think the market is accelerating divorces either; she doesn’t see the payout from selling as an incentive. There are benefits to staying put and co-parenting together, she adds -- especially for couples with very young children.
But the hot market adds stress to couples, Laber says, even relatively happy ones. If they are currently trying to buy, endless rounds of bidding wars and disappointments add drama to a relationship. And for couples that are definitely splitting, relocating is a mess.
“I know one couple where she’s in one bedroom, he’s in another, but they’re still sharing the house because she’s been hunting and hunting and she keeps getting outbid,” Laber says. “It’s temporary, she really wants out. But she’s having to lower what she wants -- what she’s willing to settle for -- to get out the door. Because her half just isn’t going as far.”
‘Keep the House Together, But Live Apart’
Creative living and legal arrangements are filling gaps in an impossible market. A recent Modern Love column in the New York Times explored “when the end of a marriage means living on separate floors of the same house.”
Tia Pham, a RE/MAX Professionals broker who specializes in Etobicoke, describes an older couple in a unique situation. Approaching their retirement age, they’ve decided to retire from the marriage as well.
“They live in a fully detached house in Etobicoke, right in the city centre,” Pham says. “They bought it for peanuts in comparison to what is worth today. And it’s fully paid off, everything is great -- they could live out their days and be debt-free. But they split. And now the issue with that is, even if they were to sell it, split it, they could barely buy a condo.”
After fees, commission and holding some cash back for expenses, including maintenance fees, a condo purchased outright is not feasible. Even with a huge downpayment, Pham explains, banks would not finance them individually because their working income tapered as they aged -- they don’t earn enough to qualify for a mortgage.
“They couldn’t afford to buy each other out, either, of course,” she says. “There’s the option to do a reverse mortgage, but they’re also thinking about their children, right? In the end, they just decided to keep the house together, but live apart.”
One ex-spouse lives in the basement, one adult child lives above, and the other former spouse moved out, Pham says -- they devised a financial agreement to make it work for all parties. This way, the asset stays in the family.
‘They End Up Renting or Moving In With family or friends'
Pham thinks the housing market is a net neutral on rocky marriages -- she sees both the incentive of cashing out now or sitting tight until the market cools. But as with the retiring couple, Pham says creative solutions make sense.
“I would guess that it’s a very 50/50 thing, because for some couples, it may be easy to try to stick together,” Pham says. “For others, there’s no way. But I could definitely see two people saying, ‘Hey, maybe we can just split up the house, keep our equity, grow it and then maybe down the line, when we save up each individually, maybe we can buy each other out.’”
Adrian Coimbra, sales representative with Adrian + Andrea Real Estate Team, has been involved in only two transactions where one party was able to buy out the other -- the first situation had help from parents, the second was possible because the couple had multiple investment properties to cash out.
But buy-outs are relatively rare, he says.
“In most cases we find that partners end up selling and splitting the proceeds,” Coimbra says. “They end up renting or moving in with family or friends temporarily until they get settled.”
As for how unhappy marriages hold up under the pressures of the market, Coimbra sees the incentive to sell.
“The hot market across Canada is definitely an angle that is something to consider the past few years,” he says. “We are starting to see a shift, so maybe couples are going to take advantage if they have a hot property to sell.”
