How to divide the marital home? To keep or to Sell?
In today’s housing and rental market, most couples find that the most difficult marital asset to divide is the marital house. The family home, usually the most valuable of all the martial assets is also often the one asset with the most sentimental attachment. The combination of financial value and emotional attachment, often cause conflicting feelings about how to divide the asset.
In today’s market, most people can make a lot of money selling their house. However, that leaves both parties with the issue of where to go next. The rental market is very expensive and competitive and current high mortgage rates can make buying a house prohibitive. Additionally, the mortgage rates also make it challenging for people to buy the other party out of their interest in the house. As a martial asset, each party typically has a 50% interest in the property.
Recently, this difficult situation will lead people to decide to continue to live together for a set determined amount of time. This option provides the opportunity to save money during a temporary arrangement. Additionally, it provides some families with a slower pace separation, enabling them to come to mediation for each step. Some clients will come to mediation for a temporary co-habitation agreement for a few months, and then came back to mediation to determine the longer term separation agreement. However, this option may not be possible for some couples due to their hostile relationship or simply due to a lack of space in the home.
Selling the house and splitting the proceeds is often the “easiest” and most direct way to divide the marital asset. Often people will use the net proceeds to pay off joint debt and then use the money to purchase a new home where new memories can be created. Spring/Summer is the best time to sell a house. Starting mediation now can help you two have an agreement in time to place the house on the market this year.
Others choose to buy the other person out of the house. This enables the purchaser to remain in the same school district if they have children, maybe maintain that low interest rate, and/or remain in the same house that you want to remain in. The person who is buying out the other person out, will have to determine how they will get the money to pay the other person. Sometimes this involves selling off or trading off other assets. This can have tax implications, so it’s important to discuss this option with an accountant and a financial advisor first. Another method is taking out another mortgage or refinancing your previous mortgage. In order to do this, that person will have to show the bank sufficient income which may be difficult if this person does not have a stable income.
While these are the most common ways in which people divide the marital residence, many of my clients come up with other solutions that better fit their family’s needs. For instance, some agreed to remain joint owners until the children graduate from college or one person will simply waive any interest in the house.
We will discuss all options in mediation, so that you two can make the best decision for the both of you. Contact Family Circle Mediation to find out what option may be best for your family.
