When you get divorced, often one of the most pressing questions relates to your house. This is usually the largest asset in a typical middle class divorce, and it is also your housing. There can be emotional value to keeping the house, for you or maybe your kids. It can also be emotionally charged for the opposite reason, holding bad memories better left alone.
Fortunately, dealing with a home in a divorce is fairly simple. There are only a few options for what to do, and this article will cover the best ways to move forward with the issue of the marital home.
What do we do with the house in our divorce?
You Can Sell the House
The first, and probably most common option available is to simply sell the home. This is also the preferred method for the judge to follow, and the law loosely encourages this method. The reason that selling the home is often the best option has to do with valuation and disentanglement. On the one hand, the house has to be disentangled. Selling it is the easiest way to get both parties’ names off the deed. It also saves people from having to agree, or prove in court, on what the value is. If you sell the house, the value is whatever it sells for. The proceeds get split equally when the house is sold, and it opens up a lot of other options.
Sometimes in order to make the asset division equal in the divorce, we need to give one person a larger share of the house sale proceeds. For example, if one person is keeping their 401k valued at $100,000, then it might make sense to give the other person a larger share of the home sale proceeds to offset the 401k the first spouse is keeping. The advantage selling the home has over other options, is it gives us a pool of cash to move around to make everything else more equal.
Awarding the Home to One Person
However, selling the house isn’t the only option. The second thing people will do is award the home to one of the spouses. This is also very common. The problem is that the person who keeps the house will need to refinance it to remove the other person’s name from the title and mortgage. Usually the person who wants to keep the home is given 6 months, or maybe a year, to accomplish the refinance if they want to keep the home.
The problem with one person keeping the house is that in addition to having to refinance the home to remove the other person’s name from the obligation, they also often have to buy the other spouse out of the value. So for example, if you want to keep a house that has $100,000 in equity, you will need to come up with $50,000 as a buyout to give to the other person. Maybe this can be accomplished as I mentioned above, with your spouse taking more of the retirement account. Or maybe there are other funds you can move around to give them as their buyout. The alternative is to refinance for more than you currently owe, and take cash out of the refinance to buy the other person out.
This option isn’t feasible for everyone. For example, if you are the stay at home parent with no real income, and you want to keep the marital home so the kids can stay in their school, you might be out of luck. If you can’t qualify to refinance the house, this might not be a realistic option.
Agree to Sell Later
There is a third, less common option to resolve the situation I just mentioned. However, this can only happen if both people agree. Meaning a judge will likely never approve this if your spouse doesn’t like the idea. That option is that you two agree to sell the house at a later date. Maybe you and your spouse agree that you will stay in the house for 4 years until your youngest goes off to college. At that time, you sell the house and split the proceeds. Maybe your spouse pays the mortgage as part of a spousal support package.
Like I said, this option is available in negotiation, so it is best if you hire a creative and experienced family law attorney who can work on getting a package deal negotiated with the other parties’ attorney. More creative options are available in negotiation, which go away when you set foot in a court room.
When You Both Want to Keep the House in a Divorce
The only other problem that comes up with the house sale is if, for example, both you and your spouse want to keep the house and buy the other person out. When that happens, if an agreement can’t be reached, then the judge will need to decide who it is more fair to award the home to. In my experience this doesn’t come up often. Usually, either nobody wants to keep the house, or one person agrees the house is more important to the other. When this does arise, it is important to prepare a good case for your judge to make sure you are the one the judge decides to award the home to.
Valuing the House in a Divorce
The only real problem for the attorneys comes from valuing the house. If you want to buy your spouse out of the home, then that means you will need to figure out its actual value. Some people do this by getting a realtor to do a current market analysis, estimating what it would sell for. A more official option is to hire an appraiser, but that costs around $700 to have done.
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Tom Brasier is an experienced Oregon family law attorney specializing in divorce and custody cases. Tom serves the greater Portland area and SW Washington. He does uncontested divorces throughout Oregon and Washington State. You can contact Tom for a free consultation at 1 (503) 855-4777 or by using the contact form below. The contents of this article are not meant to replace the advice of a family law attorney as all cases vary.
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