Ahhhh, the Coronavirus pandemic. As I write this blog post, most people are torn between feelings of fatigue and fear. After more than eight months since this pandemic began, most people are understandably weary over the personal, emotional, financial, and societal upheaval that this has caused. To say that this situation has put one’s coping skills to the test would be an understatement. People yearn for a return to some sense of “normalcy”. At the same time, that yearning has been tempered by the predicted “second wave” of this pandemic, with increasing infection rates and the return of lockdowns and restrictions that had been previously eased. At the early stages of this pandemic, I had written a blog post highlighting the significant economic impacts this pandemic was having (i.e. loss of jobs, diminished incomes, reduction in asset values and net worth, increasing debt, etc.) and how all of this was complicating the ability to resolve divorce matters. Between the economic upheaval and the uncertainty over what the future would bring, negotiating settlements was becoming a daunting task.
One of the topics which I had touched upon in my earlier blog post was the extent to which this pandemic might impact a family’s most valuable asset – their home. Prior to the pandemic, the housing market was looking strong. Homes were moving, prices were rising and everyone was looking forward to a robust spring market. However, when the pandemic hit everything, including the housing market, essentially came to a grinding halt. The number of new home listings, as well as mortgage applications, dramatically declined as stay home requirements took hold and the uncertainties made people leery of moving or taking on new financial commitments. While it was too early to tell how this pandemic would impact real estate values, this uncertainty would likely complicate how to approach the disposition of the marital home for purposes of equitable distribution in a divorce.
Jump forward seven months. The pandemic has resulted in a flight of people out of urban areas and choosing to move to the suburbs or country. Rather than living like sardines in close quarters with other people where the virus could more easily spread, people sought the openness and space. Further, the restrictions and lockdowns evaporated much of the quality of life living in a city would bring. The racial and societal upheaval following the death of George Floyd only exacerbated and reinforced people’s decision to move. The consequence? The housing market throughout much of New Jersey has exploded. Houses are getting snapped up as soon as they hit the market. Bidding wars are prevalent. Home values have risen dramatically. To say that it has become a buyers market would be an understatement. What impact has this had on divorce matters?
If there is any likelihood that the marital home is going to be sold as a consequence of the divorce, the parties are being encouraged in the strongest terms to do so NOW in order to take advantage of this overheated market, even when other issues incident to the divorce may remain unresolved. Even in those cases in which one party wants to retain the marital home and “buy out” the other’s interest, determining what value to assign for that purpose is made more difficult as this market has caused those values to become a constantly moving target. Why this urgency to sell? The fear that at some point in the near future the reasons for this flight to the suburbs or country will come to an end. The fear of the pandemic’s second wave is being tempered by the news that a vaccine may be right around the corner. The hope is that not too far down the road this virus will be brought under control, the need for restrictions and lockdowns will end, and that life will be returned to some sense of normalcy. Further, the apparent change in Administrations in Washington may presumably quell the racial and social unrest which had plagued our cities. If these things come to pass, the hot real estate market may suffer a dramatic cooldown. Hence, the expression “strike while the iron is hot” has driven this push to sell sooner rather than later.
Obviously, selling a home while the market is hot and getting the maximum money for it is an important consideration. However, when doing so in the context of divorce, it should not be the only one. When one home is sold, two new households need to be established. Are there children? What is the impact upon their schooling? While the hot real estate market may have enabled people to get more money for their home, the flip side is that it is going to cost more money to purchase a replacement home. Will they be able to afford it? Have the custodial arrangements been resolved? Will they require that the parties live in relative close proximity? Issues of support may need to be resolved in order to determine what types of alternate residences would be affordable. While the pandemic’s impact on the current real estate market is evident, the other uncertainties it has created largely remain. Hence, while the knee-jerk reaction of selling the marital home to take advantage of the current market is understandable, it is not one which should be made in a vacuum and without weighing and considering its impact on all other issues incident to resolving a divorce.
The attorneys at Yudes Family Law continue to be available to assist our clients in assessing these issues and in reaching creative solutions as everyone continues to navigate through these uncertain and challenging times.