
Figure out how much the house is worth<\/h2>\n
Whether you sell the house or agree to a buyout, you\u2019ll have to find out how much your property is currently worth<\/a>.<\/p>\n To coordinate a buyout, courts typically require a professional home appraisal<\/a> to determine a home\u2019s fair market value in a divorce. They need an official opinion of value to decide what\u2019s owed to the spouse who\u2019s selling their stake.<\/p>\n If both spouses order separate appraisals and the appraised values<\/a> aren\u2019t the same, a judge may be called in to make a decision or compromise.<\/p>\n Note:<\/strong> This can happen in less amicable divorces when the person buying the home wants the lowest appraisal possible to mitigate what they owe, while the person selling their share is motivated to get the highest appraisal possible to maximize what they\u2019ll receive.<\/p>\n Alternatively, if you\u2019re putting the house on the market, you may only need a comparative market analysis<\/a> from your real estate agent to set a list price. However, if you and your ex-spouse can\u2019t agree on an asking price<\/a>, a home appraisal may be necessary to break a stalemate.<\/p>\n\n\n\n\n\n Start with a free home value estimate from HomeLight. Input your address and answer a few questions about your home, and we’ll provide a preliminary estimate of home value in under two minutes.<\/p>\n \n You might feel emotionally compelled to keep your home in a divorce<\/a>, but you should take a hard look at your finances to see if you can comfortably afford to carry the load on your own.<\/p>\n Not only will you need to buy out your partner and qualify for a refinance<\/a> with your own financials and credit, but you\u2019ll also need to shoulder the cost of maintenance and repairs moving forward.<\/p>\n San Diego-based family law and estate plan lawyer Michael C. McNeil<\/a> urges his clients to think critically about finances and be conservative if they don\u2019t have the funds to buy out their spouse.<\/p>\n \u201cI usually counsel against taking out a larger loan to buy out the other spouse because incurring an even larger debt against a residence is often an unsound financial decision,\u201d says McNeil. \u201cThis is especially so when the party buying the other out is also obligated to pay child and spousal support. Often, this has a severe impact on the buyer\u2019s cash flow.\u201d<\/p>\n<\/div><\/div><\/div><\/section> You might be the one leaving your marital home, but in the eyes of your mortgage lender, you\u2019ll still be on the hook for payments.<\/p>\n Even if you file a quit claim deed<\/a> and your settlement requires your ex-spouse to pay the mortgage, your name will be on it until the buyer refinances.<\/p>\n In addition to buying out your portion of the home, your spouse will need to refinance and be able to qualify for the loan on their own. Refinancing will likely come with a higher mortgage payment and adjusted interest rate for your spouse, since he or she will need to solely shoulder the entire cost of the remaining mortgage, as well as the cash-out refinancing<\/a> owed to you.<\/p>\n While you\u2019re at it, check in on the health of your existing mortgage, especially if you plan to go on and buy another house moving forward..<\/p>\n \u201cWell over 50% of the divorcing couples or divorced couples that I\u2019ve worked for have missed payments on their mortgage,\u201d says Ray. \u201cEven if they miss payments, they have the expectation or the understanding they can still buy their next house. And that may not be the case.\u201d<\/p>\n It might seem overly complicated or a hassle to ask your spouse to refinance, but if you don\u2019t, you\u2019ll still be liable in the case that your partner defaults on the mortgage or falls behind on payments.<\/p>\n To remove your liability entirely from the mortgage, your spouse will need to refinance as the sole holder of the loan.<\/p>\n If either party in your divorce is looking to make a buyout, make sure you have your bases covered in regards to future agent commissions<\/a>, which are typically 5-6% of the sale price of the home.<\/p>\n Sometimes the buying spouse will negotiate to have about half of the standard agent commission taken out from the agreed value in the home. Typically, this is done because the buyer will end up paying these fees in the future<\/a> when the property sells.<\/p>\n If you or your spouse wants to sell your property soon, you should think twice about a buyout because you could end up paying for the fees out of your own share of the house rather than splitting it.<\/p>\n Don\u2019t forget to consider the tax implications of your various divorce settlement options.<\/p>\n The government allows married couples to exclude up to $500,000 of capital gains<\/a> on their home sale while single filers can exclude up to $250,000. If you sell your house after getting divorced or remain married but change living situations, you could inadvertently increase your tax liability<\/a> without proper planning.<\/p>\n That\u2019s because you have to meet two criteria in order to qualify for the capital gains exclusion in a divorce<\/a>:<\/p>\n So say you sold your house in 2022 while you were still married to your spouse, and then you got divorced in January 2023. To qualify for the $500,000 joint tax break<\/a>, at least one spouse has to pass the ownership test, both have to pass the use test, and you have to file a joint 2022 tax return for the year the house was sold.<\/p>\n However, if you\u2019d sold the house in 2022, but you actually moved out long before that and no longer meet the use test, then the person living in the house may only be able to exclude the single filer capital gains limit of $250,000.<\/p>\n When in doubt, consult a skilled CPA or real estate attorney to navigate the tricky world of taxes.<\/p>\n<\/div><\/div><\/div><\/section> What state you live in might impact the way you want to handle property in the divorce settlement.<\/p>\n In a community property<\/a> state, all property and income a person acquires during their marriage is classified as community property, which means it\u2019s owned jointly by both spouses. However, anything a person comes into the marriage with, anything they acquire after the divorce, as well as any inheritances or gifts they\u2019ve received at any time, are considered separate property.<\/p>\n There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. When you divorce in one of these states, community property is divided equally among both parties.<\/p>\n On the other hand, in an equitable distribution state, assets and property acquired during a marriage are divided fairly, \u201cbut not necessarily equally<\/a>.\u201d That might mean that you own a percent of the total value, but not necessarily an even half.<\/p>\n If you and your ex-spouse bought property together in a community property state, you own the property equally and the proceeds would be split 50-50<\/a>. If one of you purchased the home before marriage, then that person would be the sole beneficiary of the sale.<\/p>\n Depending on how your settlement shakes out in an equitable distribution state, you or your ex-spouse might own a more substantial portion of your home due to income contributions or family involvement. That could mean it\u2019s easier to buy out their portion of the property, or vice versa. Or it could mean more or less proceeds in your pocket from the sale.<\/p>\n Working through such an emotional process can be personally draining, but you also need to consider what\u2019s best for the family overall.<\/p>\n Depending on your relationship with your ex-spouse, you might try a setup called \u201cbirdnesting<\/a>.\u201d. Birdnesting is the practice of allowing your kids to stay in the marital home, while you and your ex-spouse rotate out. This arrangement can lessen the trauma for children going through a divorce, though psychologists only recommend it for a short-term transition.<\/p>\n Some ex-spouses also choose to occupy another unit on their property, or rent nearby<\/a> while the other spouse stays in the familial home. It might be unconventional, but sometimes what\u2019s best for the family isn\u2019t the most straightforward solution.<\/p>\n Deciding what to do with your home post-divorce is the first step, but what about everything in it? Unfortunately, you can\u2019t cut your mattress down the middle.<\/p>\n<\/div><\/div><\/div><\/section> Worldwide legal provider ARAG<\/a> offers a simple step by step to dividing up assets in the home:<\/p>\n Just as no two relationships are alike, neither are two divorces. You don\u2019t necessarily have to sell, buy out your spouse, or continue to hold the property. In some cases, you might decide to bargain using other assets.<\/p>\n Take, for example, a sizable 401(k). In a recent case, Arizona-area attorney Timothy Durkin<\/a> represented a woman who wanted to remain in her marital home post-divorce but didn\u2019t have the funds available to buy out the husband\u2019s portion of the property.<\/p>\n \u201cAfter vigorous negotiation, we were able to keep the wife in her home by offering the husband the entire 401(k) account as an offset,\u201d says Durkin. \u201cThe husband was happy as he got approximately $10,000 more in value than he would have received if he had to split the net proceeds from the home sale<\/a>.\u201d<\/p>\n There\u2019s no one right way to divide your property when it comes to a divorce settlement, but with the right resources, assistance, and considerations, you can make the best decision for you.<\/p>\n Header Image Source: (Pawel Chu \/ Unsplash)<\/em><\/p>\n<\/div><\/div><\/div><\/section>","publisher":{"@type":"Organization","name":"Homelight Inc","logo":{"@type":"ImageObject","url":"https:\/\/homelightblog.wpengine.com\/wp-content\/themes\/ccprototypev5\/images\/logo.png"}},"author":{"@type":"Thing","name":"Emma Diehl","url":"https:\/\/www.homelight.com\/blog\/author\/emma-diehl\/","description":"Emma's work has been featured in Huffington Post, NPR and XOJane. When she's not combing her neighborhood for open houses, she's writing about technology, real estate or data."}} Emma's work has been featured in Huffington Post, NPR and XOJane. When she's not combing her neighborhood for open houses, she's writing about technology, real estate or data. Taryn Tacher is the senior editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety. On average, Americans have $274,000 of wealth tied up in their homes. So you’d think that couples who once bought a house together would preserve what’s likely their biggest asset with care, no matter how heated things get. But divorced couples are often confused about how to handle the house they once bought together, which can result in serious financial consequences. “I sell a couple of hundred homes a year that are foreclosed properties for banks and government, and a huge chunk of those are as a result of a divorce,” says Tim Ray, a top agent in Kansas City, Missouri who regularly helps divorcing couples sell their home. “People just throw their hands up because they don’t know how to deal with their situation.” Rather than treat your largest financial asset with reckless abandon, review these top considerations for navigating your divorce settlement options related to the house that we’ve compiled with the help of real estate attorneys and legal experts in family law. A great real estate agent can help you navigate the complexities of selling a home in a divorce and lighten your load. HomeLight can connect you with a Certified Divorce Real Estate Expert in your area or a top agent with valuable experience helping couples successfully sell their homes due to divorce. A divorce settlement is a legal document between a divorcing couple that formally outlines the terms of the divorce regarding child custody, alimony, property division, and more. Even in the most civil of divorce proceedings, you’ll need to have a formal divorce settlement prepared. While no two divorces are the same, creating a settlement typically follows a standard timeline: If you and your spouse (soon to be ex-spouse) own property together, deciding what you do with it in your settlement is one of the bigger and more complex challenges you’ll face. You’ll want to make an informed choice based on your finances, your relationship with your ex, real estate market conditions, and the impact on your children. Most divorced couples will choose between these options: Whether you sell the house or agree to a buyout, you’ll have to find out how much your property is currently worth. To coordinate a buyout, courts typically require a professional home appraisal to determine a home’s fair market value in a divorce. They need an official opinion of value to decide what’s owed to the spouse who’s selling their stake. If both spouses order separate appraisals and the appraised values aren’t the same, a judge may be called in to make a decision or compromise. Note: This can happen in less amicable divorces when the person buying the home wants the lowest appraisal possible to mitigate what they owe, while the person selling their share is motivated to get the highest appraisal possible to maximize what they’ll receive. Alternatively, if you’re putting the house on the market, you may only need a comparative market analysis from your real estate agent to set a list price. However, if you and your ex-spouse can’t agree on an asking price, a home appraisal may be necessary to break a stalemate. Start with a free home value estimate from HomeLight. Input your address and answer a few questions about your home, and we’ll provide a preliminary estimate of home value in under two minutes. You might feel emotionally compelled to keep your home in a divorce, but you should take a hard look at your finances to see if you can comfortably afford to carry the load on your own. Not only will you need to buy out your partner and qualify for a refinance with your own financials and credit, but you’ll also need to shoulder the cost of maintenance and repairs moving forward. San Diego-based family law and estate plan lawyer Michael C. McNeil urges his clients to think critically about finances and be conservative if they don’t have the funds to buy out their spouse. “I usually counsel against taking out a larger loan to buy out the other spouse because incurring an even larger debt against a residence is often an unsound financial decision,” says McNeil. “This is especially so when the party buying the other out is also obligated to pay child and spousal support. Often, this has a severe impact on the buyer’s cash flow.” You might be the one leaving your marital home, but in the eyes of your mortgage lender, you’ll still be on the hook for payments. Even if you file a quit claim deed and your settlement requires your ex-spouse to pay the mortgage, your name will be on it until the buyer refinances. In addition to buying out your portion of the home, your spouse will need to refinance and be able to qualify for the loan on their own. Refinancing will likely come with a higher mortgage payment and adjusted interest rate for your spouse, since he or she will need to solely shoulder the entire cost of the remaining mortgage, as well as the cash-out refinancing owed to you. While you’re at it, check in on the health of your existing mortgage, especially if you plan to go on and buy another house moving forward.. “Well over 50% of the divorcing couples or divorced couples that I’ve worked for have missed payments on their mortgage,” says Ray. “Even if they miss payments, they have the expectation or the understanding they can still buy their next house. And that may not be the case.” It might seem overly complicated or a hassle to ask your spouse to refinance, but if you don’t, you’ll still be liable in the case that your partner defaults on the mortgage or falls behind on payments. To remove your liability entirely from the mortgage, your spouse will need to refinance as the sole holder of the loan. If either party in your divorce is looking to make a buyout, make sure you have your bases covered in regards to future agent commissions, which are typically 5-6% of the sale price of the home. Sometimes the buying spouse will negotiate to have about half of the standard agent commission taken out from the agreed value in the home. Typically, this is done because the buyer will end up paying these fees in the future when the property sells. If you or your spouse wants to sell your property soon, you should think twice about a buyout because you could end up paying for the fees out of your own share of the house rather than splitting it. Don’t forget to consider the tax implications of your various divorce settlement options. The government allows married couples to exclude up to $500,000 of capital gains on their home sale while single filers can exclude up to $250,000. If you sell your house after getting divorced or remain married but change living situations, you could inadvertently increase your tax liability without proper planning. That’s because you have to meet two criteria in order to qualify for the capital gains exclusion in a divorce: So say you sold your house in 2022 while you were still married to your spouse, and then you got divorced in January 2023. To qualify for the $500,000 joint tax break, at least one spouse has to pass the ownership test, both have to pass the use test, and you have to file a joint 2022 tax return for the year the house was sold. However, if you’d sold the house in 2022, but you actually moved out long before that and no longer meet the use test, then the person living in the house may only be able to exclude the single filer capital gains limit of $250,000. When in doubt, consult a skilled CPA or real estate attorney to navigate the tricky world of taxes. What state you live in might impact the way you want to handle property in the divorce settlement. In a community property state, all property and income a person acquires during their marriage is classified as community property, which means it’s owned jointly by both spouses. However, anything a person comes into the marriage with, anything they acquire after the divorce, as well as any inheritances or gifts they’ve received at any time, are considered separate property. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. When you divorce in one of these states, community property is divided equally among both parties. On the other hand, in an equitable distribution state, assets and property acquired during a marriage are divided fairly, “but not necessarily equally.” That might mean that you own a percent of the total value, but not necessarily an even half. If you and your ex-spouse bought property together in a community property state, you own the property equally and the proceeds would be split 50-50. If one of you purchased the home before marriage, then that person would be the sole beneficiary of the sale. Depending on how your settlement shakes out in an equitable distribution state, you or your ex-spouse might own a more substantial portion of your home due to income contributions or family involvement. That could mean it’s easier to buy out their portion of the property, or vice versa. Or it could mean more or less proceeds in your pocket from the sale. Working through such an emotional process can be personally draining, but you also need to consider what’s best for the family overall. Depending on your relationship with your ex-spouse, you might try a setup called “birdnesting.”. Birdnesting is the practice of allowing your kids to stay in the marital home, while you and your ex-spouse rotate out. This arrangement can lessen the trauma for children going through a divorce, though psychologists only recommend it for a short-term transition. Some ex-spouses also choose to occupy another unit on their property, or rent nearby while the other spouse stays in the familial home. It might be unconventional, but sometimes what’s best for the family isn’t the most straightforward solution. Deciding what to do with your home post-divorce is the first step, but what about everything in it? Unfortunately, you can’t cut your mattress down the middle. Worldwide legal provider ARAG offers a simple step by step to dividing up assets in the home: Just as no two relationships are alike, neither are two divorces. You don’t necessarily have to sell, buy out your spouse, or continue to hold the property. In some cases, you might decide to bargain using other assets. Take, for example, a sizable 401(k). In a recent case, Arizona-area attorney Timothy Durkin represented a woman who wanted to remain in her marital home post-divorce but didn’t have the funds available to buy out the husband’s portion of the property. “After vigorous negotiation, we were able to keep the wife in her home by offering the husband the entire 401(k) account as an offset,” says Durkin. “The husband was happy as he got approximately $10,000 more in value than he would have received if he had to split the net proceeds from the home sale.” There’s no one right way to divide your property when it comes to a divorce settlement, but with the right resources, assistance, and considerations, you can make the best decision for you. Header Image Source: (Pawel Chu / Unsplash) At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts. Contributing Author Emma's work has been featured in Huffington Post, NPR and XOJane. When she's not combing her neighborhood for open houses, she's writing about technology, real estate or data. Senior Editor Taryn Tacher is the senior editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety.\n <\/div>\n \n
Unsure What to Do With the House? <\/h3>\n
Don\u2019t insist on keeping the house unless you can afford it<\/h2>\n
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If you\u2019re the one leaving home, get your name off the mortgage<\/h2>\n
Agent commission negotiations can get messy<\/h3>\n
Think about the tax implications of your decision<\/h2>\n
\n
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Know your state\u2019s property division laws<\/h2>\n
How does this impact the sale of your property?<\/h3>\n
Think about what\u2019s best for the family<\/h2>\n
Divide up the items inside the house<\/h2>\n
\n
Consider creative avenues for property division<\/h2>\n
How to Navigate Your Divorce Settlement Options Related to the House
Find an Agent Experienced in Divorce Sales
What is a divorce settlement, and how does property factor in?
Figure out how much the house is worth
Unsure What to Do With the House?
Don’t insist on keeping the house unless you can afford it
If you’re the one leaving home, get your name off the mortgage
Agent commission negotiations can get messy
Think about the tax implications of your decision
Know your state’s property division laws
How does this impact the sale of your property?
Think about what’s best for the family
Divide up the items inside the house
Consider creative avenues for property division