Your house may be the biggest asset that you have to split in a divorce. That means it could be a lightning rod for disputes and figuring out how to divide it equitably can be a tricky proposition.
So, how do you decide who gets the house?
There are a number of factors at play here.
Let’s take a closer look at the issues and some possible solutions that might work for your situation.
Is it marital (community) property or separate property?
Before you can decide who gets the house in a divorce, there are a couple of basic questions you need to answer. The first of these is who owns it. In most cases, both spouses will be able to claim a piece of ownership. But that’s not always the case.
The cleanest of all scenarios is if you got married, then bought your home together, and you live in a community property state. In that case, the value is relatively easy to determine. Each spouse would be entitled to receive 50% of the equity.
So, if you got married, bought a house together and it’s now worth $1 million, then you would each be entitled to $500,000.
But life and a division of the home in a divorce isn’t always that cut and dried. There are a handful of states governed by community property rules in a divorce. The vast majority are equitable distribution states.
In an equitable distribution state, property division is more complicated. Either you can reach an agreement with your spouse on how to divide assets, or a court will decide the matter for you.
Equitable distribution means that the courts will try to be fair when divvying up things, but that doesn’t always mean that each spouse will receive 50% of those assets.
Complicating matters further is if one spouse owned the house before the marriage. If that spouse takes specific steps to keep the house as a separate asset during the marriage, then he or she will get to keep the house in a divorce.
But more often than not, when two households become one, assets are mingled. If a spouse moves in and starts making contributions to paying the mortgage and the upkeep of the home, then the house can become a marital asset.
As you might guess, unraveling ownership and intent, as well as balancing the house as an asset against other assets in the marriage, can quickly become complicated.
In some cases, to avoid a fight, a spouse may agree to give up their interest in the house in exchange for a greater interest in another significant asset. Many times, this is a greater share in a retirement account.
Who decides who gets the house in a divorce?
This is pretty simple.
Either you and your spouse can figure out who gets the house, or how it is divided, or a judge will make that decision for you.
There are pros and cons to both.
If you and your spouse can figure it out, you’re going to save a lot of money, time and aggravation. Aside from child custody, there is often an emotional attachment to the family home, and that can complicate matters to the point of an impasse. At other times, it can lead to an all-out war.
The main drawback of trying to decide on your own is that one spouse may be out-maneuvered in negotiations and wind up with less than they might get otherwise. If one spouse has a strong personality and has dominated a marriage, the other spouse could be at an unfair disadvantage. Any goodwill built up by trying to solve things on your own is wiped out when the result is a lopsided deal.
If the courts decide on your behalf, then you are placing your trust in a stranger to make the right choice for you. Granted, a judge has a lot of experience in these matters, but the nuances of the divorce may not be taken into account. It will become more of a dollars and cents type of agreement.
There’s also a good chance that lawyers will play a role when the court decides. That’s going to cost you money and time. If you’re hoping for the quickest end possible to your divorce, this is not the way to go.
There may also be a need to hire an independent appraiser or other financial professionals to determine how the disposition of the house affects the overall settlement agreement.
Determining how a house is divided is never an island unto itself.
If you are reasonably smart, reasonably rational and get along reasonably well with a spouse, then you can probably try to work things out on your own. But if you get even a hint that you don’t like how things are progressing, don’t take any chances. Call in the pros to help you get the best possible and fairest deal that you can.
What factors does the court consider when deciding who gets the house?
As previously mentioned, deciding who gets a house in a divorce does not happen in a separate void. It’s generally woven into an overall settlement agreement. Again, this is simpler in a community property state, and much less so in an equitable distribution state.
The main factor the court will consider is the goal for the house, as stated by both parties. If one spouse wants to keep the house (perhaps to continue raising a family with less disruption), and the other spouse wants out, then it becomes more of a math problem than anything else.
If neither spouse wants to keep the house and both want a fresh start, then disposing of the house can make for a clean break.
But when both spouses want the house, a judge will consider the needs of each side and rule accordingly. Some factors that might sway a decision are if children are involved, who has primary custody, is alimony part of the settlement, and the age, health and earning power of each spouse.
Each state has various laws in place with a list of factors that judges must either consider or exclude with ruling on a house. If there’s a dispute with your house, it’s best to consult an attorney. He or she will be familiar with these laws so that they can be applied in your favor the best way possible.
Options for dividing the house in a divorce
Depending on the goals and desires of each spouse, there are several ways that a house is divided.
The cleanest of these is to sell the house, divide the proceeds according to the particulars of your divorce, and move on.
When one spouse wants to keep the house, a couple of scenarios can come into play. The “in-house” can buy out the “out-spouse” at a negotiated price, and become the sole owner of the property. The house may need to be refinanced, so the in-spouse needs to make sure they can qualify with their own sources of income going forward.
The upside here is that the spouse who refinances can take out a larger loan on the property to pay off the agreed-upon amount going to the out-spouse.
If the in-spouse wants to stay in the house, perhaps to continue raising children, then if the couple agrees, both sides can still own the home and decide to sell it at a later date. This co-ownership through a deferred sale gives time to resolve many other outstanding divorce issues and isolates the sale to a time that is more convenient in the future.
The downside of this is that equity in the home does remain tied up, so if the out-spouse wants to buy another home or condo, they could be hamstrung in their efforts.
Do you really want the house?
Welcome to the age-old battle between the heart and the head.
If you’ve lived in the house for any amount of time, chances are you have countless memories associated with the house. Pets, kids, birthday parties, holiday gatherings, curling up on the couch for movie nights, BBQs, family traditions, and many others can create a deep emotional investment for you.
You have to ask yourself how much those memories are worth, and can you keep those memories alive, even if you don’t live in the house anymore.
The flip side of this is that this house may also be the site of a lot of troubled times when your marriage was falling apart. The arguments, yelling, screaming, nights spent crying or sleeping in another room may be too much for you to bear. In some cases, an emotional attachment is more than counterbalanced by some ugly remembrances.
A big reason to keep the house is to provide stability for your children. They are always the innocent victims of a divorce, unable to control their destinies until they are older, but still intimately impacted by you and your spouse’s failures as husband and wife.
A divorce is traumatic for kids, and often it’s best to try to minimally disrupt their lives by keeping them in the same schools, same neighborhoods, with the same friends, and other familiar totems of their lives. It doesn’t always work out that way, but it is a worthy goal if you can swing it.
One thing to know if you have to move the kids out as part of a divorce is that kids are resilient. They may be deeply affected by a divorce, but over time, they will adjust.
As a parent, you can do your part by not fighting about the house (or any other marital issue) in front of them. Also, make sure they know the divorce is never their fault and that you will continue to love them unconditionally.
From a financial point of view, keeping the house may not be feasible. But your judgment could be clouded by your emotions, making this a dangerous decision if you enter into a deal that you can’t handle.
If you don’t have deep resources, or taking on payments on your own scares the crap out of you, then as much as you don’t want to face facts, you need to move to a more stable form of existence post-divorce. This may mean a smaller home, a condo, or renting until you can right your finances.
You may not even qualify for a refinance on your own, taking the decision out of your hands. Another lurking issue may be tax implications. Be sure to ask about tax liabilities, so you’re not ambushed down the line.
How much is your house worth?
If you intend to buy out your spouse (or vice versa), you need to determine the buyout amount.
In order to do that, the first step is to determine how much your house is worth. There are several ways to come up with a value as you can see here.
The best way to value your house is to obtain a formal appraisal. Your attorney or a CDFA may be able to recommend a qualified real estate appraiser to do the work. In most cases, you and your spouse would split the cost for this service.
Until you have an accurate value in hand, it’s impossible to negotiate in earnest.
Again, when you’re dealing with a house transaction, you’re going to be dealing with a significant dollar amount. An appraisal is the insurance policy you need to protect your financial interests.
Once you know how much your house is worth, then you can calculate the equity and buyout amount.
Who gets to stay in the house during a divorce?
It depends on what you or the courts decide.
When one spouse voluntarily leaves as part of the initial separation, then there’s a good chance this arrangement may continue.
The stakes are raised any time there is domestic abuse. In these cases, the abusive spouse can be forced to stay away from the house through a restraining order. Violating it will make them subject to arrest.
A spouse with children will be given preference to stay in the house until a settlement is reached, but not always. The spouse may choose to move out to live with relatives or friends if the other spouse decides to stay.
When there’s animosity involved, and neither spouse wants to leave, the court will step in and decide living arrangements.
Also, if it is a longer-term goal to keep the house following divorce, staying in the house during a separation can be the least disruptive option as well.