4 Options for the Marital Home in Divorce and How We Can Help

When couples get divorced, they must determine the full extent of their marital property, both assets and liabilities, for division between the spouses. For most divorcing couples, the largest asset they have is their family home. Many emotions are attached to the home, but there are also many practical concerns that must be considered when deciding how to divide ownership in the property in a way that best benefits the family.

Option 1: Maintain Joint Ownership After the Divorce

This is almost never recommended. If a couple is splitting, there are likely very good reasons, and joint ownership of a large asset is likely to perpetuate or even increase friction between them. However, there are times when this might be a good short-term option as the couple continues to determine the best next step.

Option 2: Sell the House

At first glance, selling the marital home seems like the easiest option. A complete appraisal of the property and improvements made over the years will determine the market value of the home. You’ll need a real estate agent who specializes in divorce-settlement home sales, as this sort of sale is significantly different from selling a home for a single individual or a married couple. You’ll want to find someone whom both of you can trust and will defer to.

Ask yourself: Do you need a quick sale or should you wait for top dollar? Which of you will handle the details? Who will pay for necessary upgrades to make the home more sale-able? Who will handle price negotiation? Your Divorce Settlement Agreement should detail most of this.

The answers to these questions can complicate the sale of a house for a divorcing couple since there are bound to be disagreements. In addition, leaving the family home can cause great distress and upheaval for children, and may include the need to change schools and lose touch with friends, adding additional trauma to the already distressing situation of their parents’ divorce.

Option 3: Let One Spouse Keep the House

Keeping the house can be a comforting choice for a spouse emotionally attached to the home. And if children are still in the home, this is often the least traumatic option for them. Since mothers usually take custody of the children, wives are often more likely to want to keep the home. But this requires the spouse receiving the house to buy out the other spouse’s share of the equity.

As with a sale of the home, an appraisal is necessary to determine fair market value. The spouse keeping the house would be responsible for paying a portion of the equity (often half, but not always) to the other spouse (equity = house value minus existing mortgages and liens). This is where things get complicated.

First of all, the spouse keeping the house will probably need to refinance the existing mortgage(s) since the other spouse will almost always want to have their name removed from the mortgage(s) on a house they will no longer own.

And how will the spouse who is keeping the home pay such a large sum to the other spouse? If there aren’t sufficient other assets, the spouse keeping the home can try to refinance with an equity buyout or cash-out mortgage, providing additional funds to pay off the ex. But in many cases, especially when the wife is keeping the home, she might not have sufficient qualified income (alimony and child support payments can be used to show income if certain requirements are met) or sufficient credit history to be able to refinance or get the needed loan.

The cost of buying out the spouse is only one consideration in keeping the house. One must also factor in real estate taxes and expenses for upkeep: utilities, regular upkeep, and major home repairs must all be budgeted into the cost of keeping the home.

What is a person to do? We offer a unique option.

Option 4: Sale-Leaseback

This option combines the benefits of options 2 and 3 with the least amount of stress and anxiety, satisfying both spouses. Next Act Properties will buy the marital home from the divorcing couple and lease the home back to the spouse who is staying. This option provides a very quick, satisfying resolution of a prickly and emotionally charged situation.

Whatever option you determine you need, or if you’d like to talk to someone about which option might be best for you, please contact us at Next Act Properties today to help you resolve this aspect of your divorce.