Divorce and Real Estate: What Colorado Homeowners Should Know
Divorce often involves decisions about a home, investment properties, and other real estate. For many couples, the house is one of their largest shared assets. It may also be where they have raised their children, built their lives, and invested a significant amount of money.
Deciding what to do with the property can be difficult, especially when the two people have different financial needs or plans for the future. Some couples decide to sell the home and divide the proceeds. Others want one person to keep it. In some situations, the property may need to be sold because neither person can afford to maintain it independently.
There is no single solution that works for every couple. The important thing is understanding the financial and practical consequences of each option before making a decision.
What happens to the house during a Colorado divorce?
Colorado follows an equitable distribution approach to dividing marital property. This means the court generally divides marital property in a manner it considers fair, but that does not necessarily mean every asset is divided equally. The court considers the circumstances of the marriage and the parties when determining how property and debt should be divided. A home purchased during the marriage may be considered marital property even if only one spouse's name appears on the deed or mortgage. There can also be questions about property owned before marriage, inherited property, gifts, and changes in value during the marriage.
These are legal questions that should be addressed with a Colorado family law attorney.
Can you sell the house while a divorce is pending?
There are important restrictions to understand. Under Colorado law, once a divorce petition has been filed and served, or service has been waived and accepted, an automatic temporary injunction generally applies to both parties. Among other things, the injunction restricts transferring, encumbering, concealing, or disposing of marital property without the other party's consent or a court order, subject to limited exceptions. That means one spouse generally cannot independently decide to sell the marital home simply because they want to move forward.
If both parties agree to sell, they should work with their attorneys to determine what consent or court approval is required and how the proceeds will be handled. If the parties disagree, the issue may need to be addressed through the court.
Do not sign a listing agreement, transfer ownership, or enter into a purchase contract without understanding the applicable court orders and getting the required approvals.
What are the options for the marital home?
There are several common ways couples handle real estate during divorce.
Option 1: Sell the property and divide the proceeds
Selling the home is often the most straightforward way to separate the real estate asset. The sale proceeds can be distributed according to the parties' agreement or court order after paying the mortgage, liens, and transaction expenses. This can allow both people to move forward with separate housing and finances.
However, the amount available to divide may be different from what the couple expects. For example, a home that sells for $500,000 with a $350,000 mortgage balance does not necessarily produce $150,000 in available equity. The parties also need to account for:
- Real estate brokerage compensation
- Title and closing costs
- Property tax prorations
- Mortgage payoff fees or other obligations
- Repairs or buyer concessions
- Other liens against the property
An estimated seller net sheet can help show what the couple may receive after the sale.
Option 2: One spouse keeps the home
Sometimes one person wants to remain in the home. This may be especially important when children are involved and maintaining some stability is a priority. The spouse keeping the property may need to buy out the other person's interest. That amount is usually determined through the couple's agreement or court process, with the property's value and any relevant debts taken into consideration. The spouse keeping the home also needs to determine whether they can afford the mortgage, taxes, insurance, utilities, and maintenance on their own.
There is an important distinction between receiving ownership of the home and being responsible for the mortgage. A divorce agreement or court order does not automatically remove the other spouse from the mortgage loan.
Option 3: Refinance the mortgage
If one spouse keeps the home, refinancing may be necessary to remove the other spouse from the existing mortgage. The spouse retaining the property must qualify for the new loan based on their individual income, credit, debt, and other financial circumstances. Refinancing may also change the interest rate and monthly payment.
For example, a couple with a mortgage at 3% may find that refinancing at a higher current rate significantly increases the monthly cost. This is why it is important to speak with a mortgage professional before agreeing to a buyout or setting deadlines in a divorce settlement.
Option 4: Assume the existing mortgage
Depending on the loan program and servicer, one spouse may be able to assume the existing mortgage and request a release of the other spouse from liability. This can be worth exploring when the existing mortgage has a favorable interest rate.
However, not every loan allows the same process, and the spouse keeping the home may still need to meet the lender's requirements. The Consumer Financial Protection Bureau has reported that some homeowners encounter significant delays and communication problems when trying to complete mortgage assumptions after divorce.
Start the process early and get the lender's requirements in writing.
Option 5: Continue owning the property together temporarily
Some couples agree to keep the property jointly owned for a period of time. For example, they may decide that one spouse will remain in the home while the children finish a school year, or that the property will be sold at a later date.
This arrangement can create complications. Both parties may remain responsible for the mortgage and other obligations. They also need to agree on who pays for maintenance, utilities, insurance, taxes, and unexpected repairs. If the property is jointly owned, decisions about listing, repairs, offers, and future expenses should be addressed clearly in the agreement or court order. An attorney can help establish the terms and explain what happens if one person does not follow the agreement.
Why does the home's value matter?
The value of the home can affect nearly every real estate decision in a divorce. If one spouse wants to keep the property, the couple needs a reasonable understanding of its market value to evaluate the proposed buyout. If the property is being sold, the value helps establish an appropriate asking price and estimate the potential proceeds.
There are several ways to estimate a home's value.
Comparative market analysis: A real estate agent reviews recent sales, current listings, and property characteristics to estimate a likely market value.
Appraisal: A licensed or certified appraiser provides an independent opinion of value based on a formal appraisal process.
Broker price opinion: A broker price opinion is another type of property valuation prepared by a real estate professional, generally for a specific purpose.
These are not interchangeable. An attorney or court may require a particular type of valuation depending on the circumstances. A real estate agent can provide market information, but should not represent a comparative market analysis as a formal appraisal.
What if the spouses disagree about the home's value?
This is a common source of disagreement. One person may believe the home is worth more because of improvements, personal investment, or emotional attachment. The other may focus on the repairs needed or the prices of competing properties. A neutral market analysis can provide a starting point for the conversation.
If the parties cannot agree, they may need to obtain an independent appraisal or follow another valuation process established by their attorneys or the court. A real estate agent's role is to provide market information and explain how buyers are likely to view the property. The agent should not decide how much equity either spouse is legally entitled to receive.
What if the home has little or no equity?
Sometimes the mortgage balance and selling expenses leave very little money after a sale. In other situations, the property may be worth less than the amount owed. If the sale proceeds will not cover the mortgage and other approved expenses, the couple may need to consider additional options. These could include bringing money to closing, exploring a lender-approved short sale, or evaluating whether keeping the property is financially practical.
A short sale requires lender approval and does not automatically eliminate the remaining debt. If the property has negative equity, the couple should understand the financial and legal consequences before agreeing to a sale. More on short sales here.
What does a real estate agent do when working with divorcing couples?
A real estate agent can help manage the practical real estate work while the attorneys handle legal matters. The agent's responsibilities may include:
- Providing a comparative market analysis
- Explaining current market conditions
- Estimating likely selling costs and potential proceeds
- Coordinating property preparation and listing
- Scheduling photography, showings, and inspections
- Communicating offers and counteroffers to the parties
- Coordinating with attorneys when authorized
- Keeping the transaction organized and documenting important communications
- Coordinating the closing process with the title company
The agent can also help explain what buyers are likely to expect, which repairs may be worthwhile, and how pricing decisions may affect the time it takes to sell. In a divorce transaction, communication and clear expectations are especially important. The agent should follow the parties' written instructions, applicable court orders, and the agreed process for making decisions.
Can a real estate agent be required to testify in divorce court?
Yes. A real estate agent who has worked with a divorcing couple may be asked to provide information or testify in court. This does not happen with every divorce-related sale, but it is a possibility when the real estate transaction becomes part of a disputed issue. For example, the court may need information about:
- The property's estimated market value at a particular time
- How the asking price was determined
- The comparable sales used to establish the asking price
- Offers received on the property
- Whether an offer was accepted or rejected
- The condition of the property during the listing
- Communications between the agent and either spouse
- The marketing and showing history
- Whether the agent recommended a price change
- The circumstances surrounding the eventual sale
An agent may have information that helps the court understand what happened during the transaction.
Fact witness versus expert witness
There are two different ways an agent may be involved.
Fact witness
A fact witness provides information about things they personally observed or did. For example, an agent might testify that they recommended listing a home at $475,000 based on comparable sales, that the property received three offers, or that one spouse instructed them to postpone a showing. The agent is explaining what happened and what they personally know.
Expert witness
An agent may also be asked to provide an opinion based on professional knowledge and experience. For example, the court may need an opinion about the property's market value at a particular point in time, how comparable properties affect its value, or how the local market influenced the sale. However, being a licensed real estate broker does not automatically make someone a qualified expert for every valuation question. The court determines whether the person's experience and knowledge qualify them to provide the proposed opinion.
An agent's comparative market analysis is also not the same thing as a formal appraisal. If the court needs a formal property valuation, an independent appraiser may be more appropriate.
How does an agent get called to testify?
An attorney may ask an agent to participate voluntarily. If the agent's testimony or records are needed and the agent does not agree to participate voluntarily, an attorney may seek a subpoena. A subpoena is a legal document requiring someone to appear for a deposition, hearing, or trial. A subpoena may also require the person to bring specific records or documents. For example, an agent might be asked to bring:
- The listing agreement
- Comparative market analysis
- Listing history and price changes
- Offers and counteroffers
- Emails and text messages
- Showing records
- Inspection-related communications
- Closing documents in the agent's possession
A deposition is different from testifying at trial. During a deposition, an attorney asks questions under oath, usually before the hearing or trial. The testimony is recorded and may later be used in the case. If an agent receives a subpoena, they should not ignore it. They should contact their managing broker and consider obtaining legal advice about their obligations, the documents requested, and any confidentiality or privilege concerns.
What happens when an agent testifies?
The process is generally similar to other witness testimony. The agent may be asked to explain their role in the transaction, describe the work they performed, and answer questions about the property's market value or sale history.
Both attorneys may ask questions. One attorney may ask about the agent's pricing recommendations, while the other may challenge the comparable sales, assumptions, or conclusions behind those recommendations. The agent should answer honestly and stick to what they know. If they do not remember something, they should say so rather than guess. An agent should also be prepared to distinguish between documented facts, professional opinions, and things they were told by someone else.
Can the agent be hired specifically to provide a valuation opinion?
Yes, but that is different from simply testifying about a transaction they handled. A party may retain a qualified real estate professional or appraiser to provide an opinion for a divorce case. The person may need to provide supporting documentation, explain their qualifications, and be available for questioning. Colorado's domestic relations rules address expert witnesses, including the possibility of the parties selecting one expert together or having the court appoint an expert when appropriate.
If an agent is specifically retained to provide expert testimony, the scope of the assignment, compensation, disclosures, and possible cross-examination should be discussed before accepting the work. For a formal property valuation in a contested divorce, an independent appraiser may be the more appropriate professional.
Does an agent have to take sides?
An agent should provide accurate information and professional opinions within the scope of their role. They should not change a market analysis or testimony to support one spouse's preferred outcome. If an agent is working with both spouses on a sale, maintaining clear records and communicating consistently can be especially important. The agent should also be careful about making statements about either spouse's motives, financial circumstances, or legal rights. Those issues are outside the agent's role.
The goal is to provide reliable information about the property and the transaction, not to decide how the divorce should be resolved.
Can a real estate agent work with both spouses?
Depending on the circumstances, a real estate agent may be able to assist both spouses in the sale of jointly owned property. However, the agent must comply with Colorado brokerage relationships and disclosure requirements.
If the spouses have conflicting interests, disagree about pricing, or want separate representation, a different arrangement may be more appropriate. The agent should explain the available brokerage relationships and any potential conflicts before proceeding. A real estate agent is not a mediator, divorce attorney, financial advisor, or appraiser. The role is to handle the real estate transaction professionally and provide objective information about the property and market.
What should you do before listing a home during divorce?
Before putting the property on the market, consider taking these steps:
- Talk with your attorney. Confirm whether the property can be listed and what approvals or court orders are required.
- Understand the mortgage. Determine the current payoff amount, payment status, and any other liens.
- Get a realistic market value. Review comparable sales and current competition.
- Estimate selling costs. Understand what the sale may produce after expenses.
- Agree on responsibilities. Decide who will handle maintenance, utilities, access, cleaning, and showing preparation.
- Establish communication procedures. Decide how offers, repairs, and other decisions will be reviewed and approved.
- Understand the proceeds. Confirm how the closing funds will be handled under the parties' agreement or court order.
These steps can help prevent avoidable delays and disagreements.
Selling a home during divorce in Colorado Springs
If you are going through a divorce and need to sell a home in Colorado Springs or El Paso County, the real estate process can be handled with clear communication and an organized plan. I can help evaluate the property, explain current market conditions, estimate selling costs, and coordinate the listing and closing process with the appropriate parties. If attorneys are involved, I can communicate with them as authorized and provide the real estate information they need to help their clients make informed decisions. The goal is to keep the real estate transaction organized, professional, and focused on the property's market value and the agreed process.
If you have questions about selling a home or dividing real estate during a divorce, visit KevinJamesBond.com to learn more or schedule a conversation.
This article provides general real estate information, not legal, tax, financial, or mortgage advice. Colorado divorce law and court orders can affect whether and how real estate may be sold or transferred. Consult a Colorado family law attorney about your specific circumstances.
