Can You Sell Your House During a California Divorce? Rules and Options

When you file for a Dissolution (the legal term for divorce in California), certain restraining orders automatically go into effect. These are commonly referred to as standard family law restraining orders. These restraining orders can be found on the back of the Summons. One, in particular, states that neither party is to dispose of any real property without the written consent of the other party or an order of the court. This restriction ensures fairness during the divorce process, but can complicate decisions about the family home, especially when one spouse refuses to sell. This comprehensive guide explores these restraining orders, the financial challenges of property division, legal options under California law, and practical alternatives to selling the marital home, helping you navigate this complex aspect of divorce.

Understanding Standard Family Law Restraining Orders

Standard family law restraining orders are automatic legal protections that apply as soon as a divorce petition is filed. These orders, detailed on the back of the divorce summons, are designed to preserve the community estate, the assets shared by both spouses, during divorce proceedings. Key provisions include:

• Prohibition on Property Transactions: Neither spouse can sell, transfer, or dispose of real property, such as the family home, without mutual written consent or a court order.
• Protection of Other Assets: These orders also prevent unilateral actions involving bank accounts, vehicles, or other significant assets.
• Enforceability: Violating these orders can lead to legal consequences, including penalties or contempt of court.

These restrictions aim to maintain transparency and fairness, ensuring neither spouse makes unilateral decisions that could harm the other’s financial interests. For more details on how these orders impact your case, explore our Family Law Services at Reape Rickett.

Financial Challenges of Maintaining the Family Home During Divorce

Typically, in divorce proceedings, one spouse leaves the family home to set up residence elsewhere, while the other remains in the former family home. This is when things get difficult because now two households must be financed. Further, once support is established by the courts, the spouse who remains in the family residence may find that there is simply not enough money to maintain the fixed overhead, including the mortgage, insurance, and property tax. Mortgage payments are often late, or a month’s payment is missed, prompting lenders to contact both parties about the missed payments.

This situation creates significant financial strain, including:

• Increased Living Expenses: Supporting two households doubles costs, such as rent, utilities, and daily expenses, stretching both spouses’ budgets.
• Mortgage and Maintenance Costs: The resident spouse (the spouse remaining in the family home) may struggle to cover the mortgage, property taxes, insurance, and upkeep, especially if spousal or child support is insufficient.
• Credit Implications: Late or missed mortgage payments can trigger lender notifications and damage both spouses’ credit scores, complicating future financial decisions.

These challenges highlight the importance of strategic planning. For guidance on managing finances during divorce, visit our Spousal Support and Child Support resources.

When Both Spouses Agree to Sell the Family Home

If both parties agree that the house needs to be sold, then there really is no issue. The process can proceed smoothly, with proceeds (if any) divided according to the divorce settlement or court orders. Key steps include:

• Obtaining a professional appraisal to determine the home’s market value.
• Hiring a real estate agent experienced in divorce-related sales.
• Ensuring compliance with restraining orders by securing written consent from both spouses.

However, complications arise when one spouse refuses to sell, which is common when the home lacks equity or emotional attachments, such as raising children, are involved.

Challenges When One Spouse Refuses to Sell

But what happens when the resident spouse is not willing to sell? Perhaps there is no equity, or the house is upside down, which means there is no incentive for the resident spouse to sell the house. Typically, assets are ordered sold or divided at the time of trial, which can be months, if not years, away. This delay can exacerbate financial strain and prolong disputes. Common reasons for refusal include:

• Lack of Equity: If the home’s market value is equal to or less than the mortgage balance, the resident spouse may see no financial benefit in selling.
• Upside-Down Mortgage: When the mortgage exceeds the home’s value, selling could result in a loss, discouraging agreement.
• Emotional or Practical Concerns: The resident spouse may wish to remain in the home, especially if minor children are involved, to maintain stability.

These situations require careful legal and financial strategies to resolve. Learn more about resolving disputes in our Property Division guide.

Court-Ordered Sales Under California Family Code Section 2108

Family Code section 2108 indicates that upon a finding of good cause, a court may order the liquidation of an asset to avoid an unreasonable market or investment risks given the relative nature, scope, and extent of the community estate. This means that the sale must be in the best interest of the community. Sometimes this is not easily shown, especially if there is no equity in the residence. If the mortgage is already behind in payments and a foreclosure notice has been given, how would a sale benefit the community? If foreclosure proceedings have already begun, and the parties’ credit has already been negatively impacted, the court may find that a sale would no longer meaningfully benefit the community estate..

Criteria for a Court-Ordered Sale

To order a sale, the court evaluates:

• Good Cause: Evidence that selling the home prevents financial harm, such as avoiding foreclosure or reducing debt.
• Benefit to the Community Estate: The sale must serve the shared financial interests of both spouses, considering the home’s equity and market conditions.
• Urgency: Situations like impending foreclosure or significant financial risk may justify immediate action.

Challenges in Proving Good Cause

• No Equity or Negative Equity: If the home has little or no equity, demonstrating a benefit to the community estate is difficult.
• Credit Damage: If foreclosure has already impacted credit scores, the court may question the value of a sale.
• Resident Spouse’s Opposition: The court considers the resident spouse’s circumstances, especially if children are involved, which may delay a sale order.

For expert assistance with court-ordered sales, contact Reape Rickett’s team.

Alternatives to Selling the Family Home

Perhaps a short sale (where the lender accepts less than the outstanding mortgage balance) or a Deed in Lieu of foreclosure (where the parties return the property to the lender, saving the lender the foreclosure expense) could be a better option. Furthermore, an increasing number of loan modifications and refinancing efforts are being attempted, especially with willing lenders. Thus, certainly saving the home, especially if there are minor children, is an attractive alternative. Thus, while liquidating real property may be an option, one must exercise caution and carefully analyze this code section, along with all other relevant factors, to address such issues effectively.

Short Sale

A short sale allows the home to be sold for less than the outstanding mortgage balance, with the lender’s approval, reducing financial loss compared to foreclosure and potentially minimizing credit damage. This process requires both spouses’ agreement, a real estate agent, and documentation of financial hardship, though tax implications may apply.

Deed in lieu of Foreclosure

A deed in lieu of foreclosure involves returning the property to the lender, avoiding the foreclosure process and its associated costs, which may lessen the impact on both spouses’ credit. It requires lender consent and a formal deed transfer agreement, but may not be viable if the lender prefers foreclosure or if other liens exist on the property.

Loan Modification

A loan modification adjusts mortgage terms, such as lowering interest rates or extending repayment periods, to make payments more affordable, allowing the resident spouse to stay in the home and preserve stability for children. This process involves negotiating with the lender and providing financial documentation, with success depending on the lender’s willingness and the spouse’s financial situation.

Refinancing

Refinancing enables one spouse to refinance the mortgage to remove the other’s name, assuming sole responsibility for payments while releasing the other from liability. This option requires good credit, sufficient income, and lender approval, making it less common due to strict requirements during divorce proceedings.

Choosing the Right Option

Selecting an alternative depends on your financial situation, the home’s equity, and the presence of minor children. For example, loan modifications are ideal for maintaining stability for children, while short sales may suit homes with negative equity. Consult our experts to evaluate these options.

Steps to Navigate a Spouse’s Refusal to Sell

When the resident spouse refuses to sell, consider these steps to resolve the issue:

1. Open Communication: Discuss financial and legal implications with your spouse, possibly through mediation, to reach a mutual agreement.
2. File a Motion for Sale: Under Family Code section 2108, request a court-ordered sale, providing evidence of good cause, such as foreclosure risks.
3. Explore Alternatives: Propose a short sale, deed in lieu, or loan modification to address financial concerns without forcing a sale.
4. Seek Legal Counsel: A divorce attorney can clarify your rights, navigate restraining orders, and advocate for your interests in court.

For professional guidance, explore our Family Law services at Reape Rickett.

Frequently Asked Questions

Can I sell my house during a divorce without my spouse’s consent?

No, standard family law restraining orders prohibit selling real property without written consent from your spouse or a court order. Violating these orders can result in legal penalties. Learn more about Property Division.

What happens if we can’t afford the mortgage during divorce?

Missed mortgage payments can lead to foreclosure notices and credit damage for both spouses. Options like a short sale, deed in lieu, or loan modification can help manage payments.

How does a court decide if selling the home benefits the community estate?

Under California Family Code section 2108, the court assesses whether the sale avoids financial risks (e.g., foreclosure) and serves the community estate’s interests, considering equity and mortgage status.

What is a short sale, and is it a good option during divorce?

A short sale occurs when the lender accepts less than the mortgage balance to sell the home. It’s suitable for homes with no equity or negative equity, minimizing financial loss.

Can I keep the family home if minor children are involved?

Yes, options like loan modifications or refinancing can help the resident spouse stay in the home, prioritizing stability for children.

What is a deed in lieu of foreclosure, and when is it used?

A deed in lieu of foreclosure involves returning the property to the lender to avoid foreclosure costs. It’s an option when selling isn’t feasible and can reduce credit damage.

How do restraining orders affect property division in divorce?

Standard family law restraining orders prevent unilateral actions like selling the family home, ensuring both spouses’ interests are protected until the court finalizes asset division.

Navigating property sales during divorce can be complex, especially with restraining orders, financial challenges, and differing spousal priorities. Whether you’re facing a spouse’s refusal to sell, struggling with mortgage payments, or exploring alternatives like short sales or loan modifications, Reape Rickett’s experienced attorneys can guide you through the process. Contact us today to schedule a consultation and protect your financial and legal interests during your divorce.