What To Do With Your Home In A Divorce
by Henry Gornbein, Partner and Head of the Family Law Unit at Lippitt O’Keefe Gornbein, PLLC –
The marital home is often one of the major assets in a couple’s marital estate. A question that I am often asked is what should we do with the marital home in a divorce?
Several years ago when the economy tanked most homes were under water and the issue was who would take the home with the debt. In some cases a couple would just walk away and let the bank take the house.
Now the economy has turned around and houses are increasing in value and we are dealing with assets that have equity. In some instances clients have put their houses on the market as part of the divorce and there have been bidding wars where houses have sold for more than the listing price.
Three options regarding the marital home
In most divorces there are three options regarding the marital home.
- The house can be sold and the net proceeds divided after the payment of any real estate commissions and closing costs.
- One spouse can buy the other spouse out at the current market value less the mortgage. Bear in mind that in many states real estate commissions and closing costs are not deducted because the house is not being sold.
- Another option is to trade the equity in the marital home for other assets. I often equate a divorce to monopoly. If you want the home, what property are you willing to swap for it?
What happens to the home when children are involved?
Many years ago it was also common for the custodial parent to be allowed to remain in the marital home for a number of years so that the children would have a place to live. The agreement would include clauses that the house was to be sold after so many years or when the children reached a certain age. At that point the person in the home would either buy the other party out at the appraised value at that future date less the mortgage or else the home would be sold and the net proceeds divided with the person in the home receiving credit for any reduction in principal on the mortgage from the date of the divorce until the date of sale.
This rarely happens now because in most divorces there is some type of shared custodial arrangement with the children.
Don’t become too emotionally attached to the marital home
I advise clients not to become too emotionally attached to the marital home. The home may be important to you. In a divorce it is important to think about not only where you are now but where you want to be in several years. If your children are young and you want to remain in the home for several years and the home is affordable then it may make sense to keep it. Prepare a budget to determine the cost of the home including the mortgage, taxes, insurance and utilities as well as possible repairs.
If you are thinking of selling the home in a couple of years it makes no sense to keep it because when you sell it you will be faced with real estate commissions and closing costs that normally are not factored in at the time of the divorce.
Another thing to think about is that homes can be expensive. They can be a money pit. Older homes often need a new roof, a new furnace, new air conditioning and perhaps some major remodeling. Do you want to bear those costs? In addition there can be problems with plumbing, leaks and perhaps even black mold. Think about these factors carefully.
In addition your dream home is not necessarily anyone else’s. After a divorce is final people move on. If you are in a new relationship or contemplating a new marriage will your significant other want to live in the same house that your former spouse occupied? Your tastes may not be someone else’s.
As you are thinking about these issues it is important to talk to a realtor or a residential appraiser to find out exactly what your house is worth as well as what options you might have if you decide to sell your home and buy another home. Sometimes a divorce is a good time to downsize or move from a home to a condo.
These are all things to consider carefully and discuss with your attorney as you go through the divorce process.