It happens: Marriages fall apart. And as if dissolving your union weren’t hard enough, if you own a home together—almost certainly your largest joint asset—you’ll also have to decide what to do with it. Do you stay, sell, or hand ownership to your ex?
While there’s no one-size-fits-all solution when it comes to dividing the house during divorce, there are multiple options that will allow you to move forward with a roof over your head.
Let’s take a look at some of the different ways couples can tackle dissembling the household.
Option 1: Sell and split the profit
Selling the home and dividing the profit is often the least complicated of all possible scenarios.
A lot of financial advisors and attorneys recommend that clients just sell the home. It is typically the simplest way to solve all the problems. Everyone gets their share, and there is no lingering joint debt to resolve.
Still, there are some caveats to keep in mind. First, if you’re trying to sell during a down market, when your house is likely to sit on the market and you stand to lose money, consider moving out and renting the property instead.
If you’re selling at a profit, on the other hand, you’ll want to watch out for capital gains tax, although the bar is high. An individual can exclude up to $250,000 in capital gains on the sale of a primary residence, and a married couple filing jointly can exclude up to $500,000. So depending on when your divorce is finalized, you might have more leeway. Those making a profit might also consider agreeing to use that money to pay off the legal expenses of your divorce.
That said, many people are understandably attached to a home, or decide that remaining in it is best for the children. In which case, consider the next option.
Option 2: Buy out (or get bought out by) your spouse
Before you make the decision to stay and possibly buy out your spouse, it’s important to find out if it’s financially feasible. It’s important to remove emotion from the equation as much as possible. Of course, this is often easier said than done.
Whether you’re the partner staying or going, make sure the buyout terms—which will include a professional appraisal of your home’s value—sound fair and accurate.
With a buyout, you have to be very careful, as there’s no actual sale involved, the figures can be very subjective. Think about how many homes are listed and don’t sell at or even near their initial asking price. Until there’s a buyer willing to pay actual money, it’s just an estimate and you can’t bank your future on that.
So if the amount being offered doesn’t sit well with you—on either side—experts encourage you to get another appraisal, much like seeking a second opinion from another doctor before moving forward.
Option 3: Delayed buyout
If you (or your spouse) want to stay in the home but aren’t in a position to purchase it at the moment, there is another option: arrange to delay the buyout.
In this scenario, the spouse that stays simply continues making the monthly mortgage payments until he can afford to buy out the other, or until the kids move out and he is ready to sell.
But this option also has its own complications. Long-term ones.
It can lead to a lot of potential issues if people aren’t careful since this arrangement can last years, there can be plenty of fights about how the house is being cared for. Or, even worse, if the partner who stays starts dating someone, can that person move in?
If you’re the spouse who’s allowing your former partner to stay in the home, you’re in a vulnerable situation should something go awry.
The biggest issue is your name remaining on the mortgage,if your ex doesn’t keep up the payments, you’re liable. It could ruin your credit rating if payments start to be missed or if the home is foreclosed on. Plus, it might affect your ability to buy another home.
The best policy to avoid any messes is to hash through all the what-ifs with a lawyer, and come up with a written plan of action. Who will do and pay for repairs? What if mortgage payments can’t be made? As long as these worst-case scenarios get addressed, no one is left holding the bag.
Option 4: Divide it, literally
Some couples choose to live together in a home after a divorce if they can’t sell it and neither can afford to support two households and live elsewhere until it sells. Being roommates after a divorce can be very complicated, both emotionally and practically. Will you share common spaces? Can you have guests? How will you share all the upkeep costs? There’s a lot to work out, and most people find this is harder to do than it initially seems.
If you are going through a separation…a divorce….a life change… and need to decide what to do with your home? I completely understand… and am here to help. Do you need to get an idea what your home is worth and what you property value is? I am happy to compile and give you a free comparative market analysis (CMA) to help you see your homes value in todays market. Many times the family home is the most valuable asset in a divorce, however, when dividing marital property, appraisal minus mortgages does NOT necessarily equal equity! This incomplete equation can leave your house over-valued and that can work against you. More real estate due diligence is needed much earlier in one’s divorce process.
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley Columbus Delaware Downtown Dublin Gahanna Grandview Heights Granville Grove City Groveport Hilliard Lewis Center New Albany Pickerington Polaris Powell Upper Arlington Westerville Worthington