Although it may be commonly perceived that your home during a divorce must be sold and the sale proceeds equally divided, that is not always the case.
There are a number of options available regarding your home when dissolving a marriage:
- Get an Appraisal – The most accurate valuation is done by an appraiser. If the house is to be sold soon, consider including the commission in determining the value.
- Keep the property – Obviously, only one of you can stay in the house and it is usually the party with custody of the children. Your arrangement might be that when the youngest child graduates from high school, the house will be sold and the proceeds divided. Both parties are still responsible for maintaining the home and paying off the loan. In other cases, the remaining spouse will have to buy out the other. A major problem is that if you are not living there, you will have to pay capital gains taxes on any profit received since it is not your homestead and you cannot rollover any of the funds. Also, the party living in the home may feel that he or she has enhanced the value of the property and that its appreciated value gained after the divorce should not benefit the other party.
- Offer a Lien or Note – If the house is not to be sold, one party could give the other a promissory note secured by the mortgage or deed of trust on the home. Notes can be discounted to get cash immediately.
- Refinance – If both parties are on the mortgage, you may have to refinance to get a new deed eliminating the other party’s name on the loan. The party who is not living in the home can be paid his or her share after a valuation and determination of the equity.
- Distribution of the Asset – Even if the home was purchased by one party before marriage, the other is entitled to some of the equity at least for helping maintain it or by contributing to the mortgage payments.
In an equitable distribution state, the court looks at a variety of factors in dividing the assets if the home is a marital asset. If the home was purchased before the marriage, there still may be equity that becomes marital property if the couple’s marriage was long enough and the other partner contributed to its appreciation in value. In this case, the partner who did not originally buy the home may get a larger percentage of the equity than the other party might deem reasonable.
If you live in a community property state and the home was purchased during the marriage, you each get an equal share of the equity if sold or at least at the time it is appraised if one party is to retain the home.