Real estate is often one of the largest assets of a marriage. As such, consulting clients often ask what will happen with their house. This question has two possible answers to it: one party may keep it and buy the other out, or the parties can sell the property and divide the net proceeds equitably. There are two steps important to either decision.
#1: Valuing the property
First, the value of the home needs to be determined. If the property is going to be sold, the realtor will generally assist the parties in determining the market price. If one party is going to keep the house, he or she will use the valuation to determine the funds necessary to buy out the other partner’s equity, which is determined by obtaining the value of the home and subtracting the outstanding mortgage.
This sound straightforward, but it can be complicated when the parties do not agree on the value. If the parties cannot agree, there are a few resources that can help: Zillow, market comps from a realtor, or hiring one (or multiple) private appraisers. If the matter proceeds to trial, the court is likely to give more weight to an appraisal than a comparative market analysis.
#2: Paying for repairs
Regardless of the decision of sale or buy-out, repairs to the home may need to be made. There are a number of ways this can be accomplished. Some couples split the agreed upon costs equally or proportionate to their respective income. Sometimes, the higher wage earning spouse will pay the costs upfront, and then at the close of escrow, that party will receive a percentage of the costs paid prior to the parties dividing the net proceeds. In some instances, the spouse retaining the residence will assume responsibility for repair costs.
Should You Keep the House?
I normally advise my clients against keeping the home unless there are special accommodations that have been made to the residence for disabled family members. My typical reasons for selling, which are completely dictated by logic alone, include: