By the time most divorcing couples find themselves in a lawyer’s office, glaring at each other from across a table, counselling has failed, goodwill has evaporated and the best way forward is a speedy division of assets so both parties can move on with their lives.
But with a volatile real estate market that has taken housing appraisals on a wild chicken run, the road to a new life has become rife with potholes.
“It’s just made everything so much harder,” says Diane McInnis, a collaborative family lawyer and mediator who focuses on “consensual dispute resolution.”
“All of my clients are in a panic — ‘I’m not gonna have enough money to be able to pay bills, to keep the house, to afford to rent!’ They’re desperate to get as much money as they can from the other person. And the other person is saying, ‘I need to house the kids and look after them too!’
“Two people and two homes on the same income level is much more expensive than one home.”
After months of escalation, housing prices have dropped in the wake of recent interest rate hikes to combat inflation, and that has sent anxieties through the roof.
With good reason. In October, Canadian mortgage interest costs increased year-over-year by 11.4 per cent, the biggest increase since February 1991, when there was an 11.7 per cent jump, according to Statistics Canada.
As interest rates continue their soufflé-like expansion, economists expect another 10 to 15 per cent drop in housing prices by spring 2023.
“I’m almost to the point where I’m saying, ‘OK, we’re going to start negotiations and deal with as much as we can, and get the house valued at the end, so we can see what we’re actually dealing with here, ’ ” says McInnis.
“Let’s say it takes three to six months to negotiate. If people get their house valued as an asset at the beginning, by the end they’re saying, ‘Wait a minute, that’s no longer what the value is!’ And now they’re renegotiating, and that’s causing headaches trying to get refinancing and all those things.”
She sighs. “It’s so stressful for clients. The housing market has been the bane of my existence as a lawyer assisting clients through separation and divorce.”
It’s no secret to Mary Goncalves, whose divorce proceedings have dragged on for almost three years, and for whom delays in reaching a settlement have meant massive financial penalties.
“Basically, you’re going through a terrible divorce, acrimonious, and it takes so long to get to the point where you need to settle,” says the retired mother of three adult children, whose multimillion-dollar home went on the market in August after 15 months of legal wrangling.
“It really holds you back with starting a new life and moving forward.”
Part of the issue was tensions with her ex, a familiar scenario exacerbated by the pandemic.
“I’m finding in the last few years that couples separating are higher-conflict than they’ve ever been,” says McInnis.
“People are so stressed out, so self-absorbed, so involved with social media, with so much feeding into their brains.
“I think what the pandemic did was expose the cracks in relationships sooner.”
Goncalves — whose housing appraisal dropped from between $10 and $12 million to $9 million while an agreement was being hammered out — knew the market was peaking, but says her ex kept finding reasons to delay.
“We finally got approval a year after the market peaked,” says the local woman, now living in a separate residence.
“But now we’re in a situation where there’s uncertainty with fluctuating interest rates.”
To minimize losses, some couples are considering more creative options.
“People say, ‘Well Diane, we could sell the house, but for both of us to go out and rent would cost us more than our monthly mortgage,’ ” says McInnis. “ ‘We don’t have enough money to buy. I’d rather try to keep the house and figure out a way where I can buy the other person out.’ ”
But in a market as variable as the weather, pinpointing a fair price again becomes an issue.
“Last year one client had their house appraised, then three or four months later it was reappraised and went up by $60,000,” says McInnis. “So there was still conflict over the negotiation. When they were into it six months, the house had gone up again.
“One person accused the other, saying, ‘You’re just delaying because house prices keep going up!’ But the other person was saying, ‘Well no, because the longer this negotiation goes on, the harder it is for me to buy into the market because housing prices are going up, so I can’t afford to accept a lower value.’ ”
She sighs. “With one couple, in the course of a six- or seven-month negotiation, the housing price changed three times upward. It was a nightmare.”
When prices dropped, which happened when interest rates began their upward ascent in March, the stakes became even higher.
“It just creates more stress for people because they’re not willing to make the jump, because they don’t know what the other side looks like,” says family lawyer Heather Caron, whose Kitchener law practice is “crazy busy” with a 25-per-cent jump in divorce cases.
“I can’t give them any idea financially of where they’re gonna be. If your house comes down in price $200,000, that’s $100,000 each that you’re losing.”
One local woman — who asked that her name be withheld while her divorce winds through the legal system — saw her matrimonial home drop 12 per cent in value while she and her ex wrangled over details and acknowledges that “when it comes to two warring parties, you can’t control the situation.
“There’s no point crying over something already done,” she says. “But the time lag has cost us dearly.”
For those whose finances were precarious to begin with, the impact can be even more devastating.
“A lot of people are in the gig economy, working part-time,” notes McInnis.
“When dividing things up they just don’t have the cash flow for banks to approve them. It just feels like owning a home now is really an exception. It’s not attainable for the average person.”
At the end of the day, says Caron, the best option for divorcing homeowners is to wait until the market settles.
“Everything is in flux right now. I’m telling people if they can hang on, hang on. Let’s deal with this, maybe in the spring, when there’s some certainty and more stability.”
Realistically, she knows, this is an unrealistic option for many.
“For them to stay in the same house, sharing the parenting, is a huge stressor,” she admits, “because they can’t get any kind of finality on this. They can’t move on.”
Does anyone look at the “crazy house fluctuations,” reel from the sticker shock and head back to counselling to work things out?
“I’m not seeing that,” says McInnis.
“Most of my clients have said, ‘Yes, we’ve gone to couples counselling,’ but by the time they see a lawyer, they’ve pretty much decided it’s not workable.
“I can honestly say in the last five years I’ve never had someone come in and, when they look at finances and numbers, say, ‘We’ve got to work on this to make it work and stay together!’
“Occasionally people do reconcile, but it’s very unusual.”
Source link
