Splitting up is hard to do, especially as co-owners
Should you sell or buy out your ex? Belinda Moffat, of the Real Estate Authority, offers some tips on how to handle co-owned property following a breakup.
QI bought my first home with my now ex-partner, but as we’ve split up, we aren’t sure what to do. We don’t know if the best idea is for me to buy them out of their share, or to sell the property. We want to cooperate to resolve the situation, but a big factor will be which process is simpler and less likely to create further conflict. Do you have any advice?
AI certainly understand how emotionally challenging the end of a relationship can be for everyone involved. Your willingness to co-operate to make the best decision for you both will be key, and I wish you all the best as you work through the options.
When you co-own property with someone you’re splitting up with, this can add a layer of complexity and stress, as it may be the most significant financial asset either of you own. I hope the suggestions here assist you both.
Getting legal advice
It is a good idea for you each to get independent legal advice on your rights and responsibilities in this situation before taking any major steps. If you’re not keen to engage a lawyer right away, the Ministry of Justice and Community Law websites have some useful online resources, and you can also reach out to your local community law centre or Citizens Advice Bureau.
The key decision to make is what to do with the property. Typically, as you have already recognised, you can jointly sell the home and split the proceeds or one of you can ‘‘buy out’’ the other.
Sometimes an agreement can be reached where you continue to co-own the property but just one of you will live in it.
In that situation, an agreement would need to be reached for covering any mortgage costs and outgoings (such as insurance and rates) and/or rent payable.
You’ve said that simplicity is important for you both. If it’s possible to reach an agreement, that will almost certainly be simpler than having the matter resolved through the courts.
With the help of independent legal advice, an agreement can be written up that sets out your individual rights and responsibilities around the sale. This protects all parties and prevents one partner from legally impeding the sale.
It’s worth noting that this can also be helpful when it comes to applying for finance for another property, as some lenders may be wary of unresolved relationship property issues.
With the way forward agreed, you can move into the sale process itself.
Putting the property up for sale
If you and your ex-partner agree to put the property up for sale and have decided how any proceeds will be split, it is important to find a licenced real estate agent that you both are comfortable with.
The real estate agent that you choose must represent you both fairly and help you make decisions. The agent must also get agreement from both of you (as joint owners) before taking any action, so it can be a tricky situation, given couples can disagree on key decisions even when they are not navigating the end of a relationship.
However, remember that an experienced real estate agent is likely to have worked with couples and families in similar situations previously and will have an understanding of many of the potential pitfalls and stumbling blocks.
If possible, meet with a number of agents in the area to find one that you both can work with. Ask them to provide you both with a current market appraisal, to give you an indication of the estimated price range your property is in and present you with a marketing plan.
Consider discussing with the agent what their experience is with regard to working with post-relationship sales and get a sense of how empathetic and skilled they will be in helping you work through the sale smoothly and successfully so that you can both move on.
Once you select an agent, you will be given an agency agreement to sign to list the property with them.
Once again, have this contract reviewed by your lawyer to make sure you’re comfortable with everything it contains before signing.
Under the Code of Conduct we oversee at the Real Estate Authority (REA), the agent is required to provide you with an opportunity to seek and receive that legal advice. They must also provide you with a document we produce, called the New Zealand
Residential Property Agency Agreement Guide, which provides detailed information on what is in an agency agreement, and the key things you should understand from the agent before you sign.
This is available in several languages, so ensure you have one that best suits your needs.
You can work with your agent to decide the best method of sale that will work for you and your ex-partner. Once you come to the point of receiving offers and negotiating with potential buyers, this can be one of the more stressful parts of the process for any vendors, and particularly in your situation.
It will be important for you and your ex-partner to come to a clear understanding of your mutual bottom lines on things like sale price (considering the current market appraisal you received, while bearing in mind that this appraisal may only be valid for a particular period of time in a shifting local market). This should help to simplify the process.
Also remember that the agent needs agreement from both of you as co-owners before accepting an offer, including any pre-settlement conditions that go into a sale and purchase agreement.
Buying out
Alternatively, you may opt to buy your ex-partner out so that you own the home by yourself, or vice versa. A buy-out involves one partner purchasing the equity interest of the other.
If this is the option you choose, a key step is to get the property valued. A registered valuer can provide you with the most accurate and comprehensive analysis of what your property is worth. This will come at a cost, but you may decide it is worth it for peace of mind. It may also be useful when you are talking to a lender, as a registered valuation can sometimes be required if you are refinancing.
Whatever option you decide to go with, my advice is to keep focused on the end goal, take time to consider your options, and ensure you are supported with good professional advice.
Belinda Moffat is the chief executive of the Real Estate Authority. She answers your house buying and selling questions. For more information about the process of buying or selling property – and what to expect when working with a real estate professional – visit settled.govt.nz.
Have a question for Belinda? Email homed@stuff.co.nz.