What happens to the house in a divorce?
Updated: Jun 1
Deciding what to do with the marital residence in a divorce can be a complex and emotional process. The marital residence is typically one of the biggest assets that a couple has and can be one of the most contentious issues in a divorce. Different options are available for a married couple when deciding what to do with their marital residence.
1. Buyout of one spouse. If one spouse wants to keep the marital residence, they may offer to buy out the other spouse's share of the property. This can be done by paying the other spouse a lump sum (often via refinance) or through a series of payments. Buyout can be a good option if one spouse has strong emotional ties to the property and if the other spouse is willing to receive a lump sum payment instead of retaining ownership. In order to make this option work, the spouses must be able to agree on the value of the house, which can be a challenge if the real estate market is volatile in regards to pricing and mortgage interest rates. Emotions can easily influence a spouse’s perception of the value of the house, regardless of the appraised value. To agree on a buyout, both spouses must be able to overcome fears that the market will (or has already) unfavorably shifted at the time the buyout is executed and instead take a long-term, big picture view of the buyout as the best option in support of both spouses’ (and the children's) long-term futures.
2. Sale of the Marital Residence. One of the most common options in a divorce is to sell the marital residence and divide the proceeds between the spouses. This can be a good option if both spouses are willing to sell the property, or if they are unable to agree on a fair buyout price. The sale of the marital residence can also help resolve any outstanding debts of the marital community, or liens that may be associated with the property. When there is a dispute about the value of the house, the sure way to settle the dispute is to sell the house. The market will answer the question “how much is the house worth?” more accurately than any appraiser or realtor ever could.
3. Continued Joint Ownership. Another option is for the couple to continue to own the marital residence together, either as co-tenants or as tenants in common. This can be a good option if the couple is still on good terms, and if they are able to work together to manage the property. However, this option may not be feasible if the couple has a strained relationship or if they have different plans for the future use of the property. There is also the risk that the relationship will deteriorate over time, especially when one spouse moves on to a new romantic relationship. Generally, joint ownership is considered risky for a divorcing couple due to the couple's inability to make ongoing decisions together. Nonetheless, some couples choose to continue joint ownership of the martial residence beyond the divorce.
4. One Spouse Keeps the Marital Residence. In some cases, one spouse may receive the marital residence. This is typically done when one spouse owning the property is in the best interests of the spouse and especially their children, and there are enough martial assets to offset the other spouse's interest in the house. The spouse who is awarded the marital residence may receive less of other marital assets, or more martial debts to offset the other spouse’s interest in the marital residence.
The best option for handling the martial residence will depend on the unique circumstances of each case, including the emotional and financial needs of each spouse and their children. When deciding what to do with the marital residence in a divorce, it is important for a divorcing couple to consider their individual and collective needs, as well as their financial and emotional well-being.
To help make the best decision, it may be helpful to ask the following questions:
What are our individual and collective emotional ties to the property?
Can we agree on a fair market value for the property?
Can either spouse afford to maintain the property alone?
Can one spouse afford to refinance the house into their own name?
Are there any outstanding marital debts that would best be paid from the proceeds of the house if sold?
Are we willing and able to continue to co-own the property?
How will maintenance and repairs be paid if we continue to co-own the property?
Who will pay mortgage, taxes and insurance on co-owned property?
Who will live in the property if it’s co-owned?
What are the tax consequences of our continued co-ownership?
If one of the spouses were to become involved in another romantic relationship, how would that affect the feasibility of co-ownership?
What would the court be likely to order if ownership of the marital residence were to be litigated?
How is selling the house likely to affect the children?
Is “nesting” a possibility if we decide to continue co-ownership of the property for the children’s benefit?
Is it in the best interests of our children for one of us to keep the property?
Can we reach an agreement that satisfies both spouses' and the children's needs and interests?
These questions can help a divorcing couple to understand their options and make an informed decision about what to do with the marital residence. It is also important to seek the advice of a divorce attorney who can help to guide you and ensure that your rights and interests are protected.