Real Estate in Divorce – The Family Home, Part 2
Part 2 of 2
For divorcing couples, the marital home is typically a highly charged emotional issue. Where there are children, it is desirable to look for a solution that focuses on the child’s or the children’s needs and interests. Even if the children are older and out of the house, or if there are no children, it is not uncommon for one spouse to have an emotional attachment to the marital home. But we cannot ignore financial considerations in determining what happens to the family home after the divorce.
Options for the Marital Home
If the home is considered marital property, then it must be added to the assets to be divided in just proportions between the parties at the time of their divorce. Obviously, a house isn’t like a pie that can be cut up however you want. Nor can a house be split up like a bank account. However, the total value or net equity in the house (appraised value minus any mortgage, home equity loans or liens) is added to the total value of all assets to be divided between the parties. There are three options for the home, in order to achieve the desired division of total assets of the marriage: sell the house immediately; sell the house at an agreed upon date in the future; or let one spouse keep the house. However, there are many nuances within these three options.
Selling the House Immediately
If the parties decide to sell the marital home immediately, they must first agree on what is to be done to prepare the home for sale, and who will pay for this work. A realtor or a staging specialist can be extremely useful in that decision-making process.
When the home is sold, there will either be proceeds from the sale or a deficit still owed. The parties must decide how to divide those proceeds or how they will pay any amount still owed. If the parties know that they intend to sell the home, it can be listed for sale while the divorce is still pending. However, the parties should plan for the contingency that the home may not sell before the divorce is finalized. In that case, there must be a plan in place for who will remain in the home until it is sold, and how the expenses associated with the home will be allocated while the house is on the market.
The parties will want to list the home for sale with an agreed upon broker, and at a mutually agreed upon listing price. The best case scenario is when the house sells immediately at a price close to the listing price. In the real world, however, houses take more than a month to sell after they are listed. It is wise, therefore, to have a mechanism in place to lower the listing price at specified dates and in specified amounts.
One Spouse Keeping the House
If one spouse wants to keep the family home, there are a number of factors that must be considered. The first is to determine whether that spouse can afford to keep the home. In other words, can that spouse afford the mortgage, home equity loan, real estate taxes, homeowners’ insurance and upkeep for the home. Another factor to consider is whether, in exchange for keeping the home, the spouse will need to give up too many, or potentially, all other assets of the marriage to the other spouse in order to achieve the desired division of assets. If the parties don’t have sufficient marital assets between them for one spouse to ‘buy-out’ the other spouses’ interest in the marital home, or if the spouse keeping the home does not have non-marital assets to help balance the division, then it may not make economic sense for one spouse to keep the marital home.
The final consideration is whether the spouse can afford to refinance the mortgage to remove the other spouse’s name. This is particularly important to consider when the spouse looking to remain in the home is not employed outside the home (or earns much less than the other spouse) and will be receiving maintenance. Refinancing right away may be a problem because he or she will need to establish a history of receiving maintenance payments. Lastly, neither spouse can ignore the reality that the house must be sold if the remaining spouse is unable to refinance.
Selling the house in the future
There are many reasons to delay the sale of the marital home beyond the date of the divorce. The parents may prefer to keep the children stable for a period of time rather than relocate during an emotionally turbulent time; they may want to keep the children in their current school district; there may be insufficient equity in the house at the time of the divorce; or the housing market at the time of the divorce may yield a less than desirable sale price for the home. Once the decision has been made to delay the sale of the home, then further questions arise: who pays the mortgage and other household expenses, who lives in the house until it is sold, will there be an extra charge for the spouse staying in the house because of the corresponding benefits, what happens if repairs are needed, how will title to the home be held until the sale, how do you decide what repairs are necessary, which spouse gets credit for payment of the principal balance after the divorce, which spouse gets the tax deductions for the mortgage interest and real estate taxes? There is no ‘one-size-fits-all’ answer to any of these questions. The answers are very fact-specific. Consulting with family law professionals who understand this minefield is important for spouses who are looking to resolve these complex issues respectfully.
Frequently, one spouse may prefer to remain in the home for the stability of the children or because the emotional ties to the home are so very strong. However, when considering whether to keep the home, it is important also to consider whether you are able to take on the expense and responsibility of the home without the income of the other spouse. This can be one of the most difficult decisions to make during a divorce. An experienced family law attorney can help you by walking you through the various options, discussing the realities of your situation, and attempting to work towards a solution which meets the needs and interests of both parties and the children.
Contact the experienced family law attorneys at Conniff & Keleher, LLC for a clearer understanding of your options in light of your special facts and circumstances.