How To Split The House In Your Divorce?

It is most likely that your home is the most treasured asset you purchased while married. Therefore, one of the biggest questions is how do you go about splitting the house in a divorce?

A lot depends on how much the home has appreciated, including market conditions, and length of time owned, to name a few.

With something this important, you need to be careful about how you choose to proceed and understand the implications of your decisions before you choose what to do.


What are the options for valuing your house in a divorce?

There are several ways to determine the value of a house which is the first step in determining how much equity you’ll be working with on a split.

The following are the most commonly used methods:

  • formal appraisal
  • broker price opinion
  • comparative market analysis
  • property tax assessment
  • online price estimator (i.e. Zillow or Redfin)

Some of these are better than others, but all can be used depending on what it is you want to accomplish.

A full appraisal by an experienced and qualified appraiser will provide you with the most comprehensive and accurate analysis.

If you end up keeping the family home and you need to refinance it, understand that every lender requires their own appraisal.  So, if you have an appraisal done to determine the home’s value for equity purposes, it may or may not be able to be used going forward.

A broker price opinion (BPO), is a report created by a real estate agent, a broker or an appraiser.

A comparative market analysis (CMA), is also done by a real estate broker. A CMA and a BPO are similar.  Both provide the estimated value of the property.  The CMA is different because it is more focused on comparable local property sales and using that information to estimate the value of your home.

A property tax assessment is used by the county or taxing agency to determine what your property taxes are going to be.  It’s less accurate than other methods because assessment values are not updated frequently.  This means that the property value amount used for property tax assessments may not be a good indicator of the current market value of your home.

Although they are available as a resource, most professionals recommend against using online price estimators like Zillow or Redfin.  They don’t always indicate the true value of a home because they don’t always take into consideration all the elements of a home that can add or subtract value.


Possible downsides of a full appraisal.

Some people counsel that you may not want to use an appraisal that is done for mortgage purposes because it might be a lower value since the bank or the lender is the one commissioning that appraisal.

But there is little evidence to suggest this is actually the case.  Real estate financing appraisals can be both higher and lower than what you’d wind up with as a divorce appraisal.

As far as downsides go, one spouse may want a higher value if they are the ones giving up the house as an asset and getting bought out.   If a spouse is going to retain the property and is buying out their spouse, it works in their favor if the house is appraised at a lower value.

Another downside is that a full appraisal can be expensive. For expensive properties, it is not unusual to see an appraisal cost $499 to $1500.

You also might not want a full appraisal because this would involve a full inspection and walkthrough. If your home has some rough spots or negatives that may hurt the appraisal amount you hope to get, then consider looking at other options. A comparative market analysis or broker price opinion won’t include a walkthrough by an appraiser in most cases.


After you agree how much the home is worth – determining equity is the next step.

Home equity is calculated as such: take any current liens on the property and subtract it from the property’s value.



Liens can be anything tied to the property that is a direct debit to the equity.  This may include things like a HELOC, first mortgage balance or even solar leases or solar loans for solar panels.

Once you have determined the value and subtracted any liens, the amount that is left is the equity in the property.

In some cases, a spouse may also hold a separate property interest, perhaps because they owned the home before the marriage.  It’s possible that there may be a reduction in co-owned equity as a result.

When the net equity interests of both parties have been determined, then the equity would be split according to asset division laws of a state where the divorce takes place.


Are there any property liens on the house?

Aside from a mortgage or HELOC on the property, many people want to know if there are other liens. If there are, how is the information obtained?

You can start by requesting a formal title report from a title company. The title report will have a full, accurate and up-to-date chain of title for the property.

A title report can be pulled by a mortgage broker who has an existing relationship with a title company.  The broker can get the title report and give it to the spouses, or the spouses can reach out directly to a title company.

You can obtain your title report for a cost ranging from $70-$275 depending on the title company.  Or if you are working with a divorce mortgage advisor, they can reach out to a title company and get one at no charge.  Realtors should also have access to title companies to get a copy of a title report for the spouses as well.

If your goal is to apply for financing as part of the divorce, then you might want to plan on using whoever you’re going to be using for escrow/mortgage services.  That way it’s done through a single entity.

The second option for determining if there are any liens would be to obtain a property profile report.

A property profile is a summary shorter version of a title report. It should match the title report, but because it’s curated from another document, it may not always be accurate.


The importance of your equity share

Your equity share is essentially your account balance.

So, if there are a million dollars in equity on a property and you’re in a community property state such as California, theoretically you and your spouse each have $500,000 dollars in equity.

It’s not a liquid asset, but at some point, that can be converted to cash through a property sale or a home buyout. Both of these are good methods for splitting the house, and getting your money out.


Ways to split the equity in your house

The most common way equity is divided is by selling the house and splitting the proceeds.

You will need to factor in some costs, such as a real estate commission, capital gains taxes, and things like to get your net share after the sale.

If you’re going to sell the house, the good news is that you don’t really need to agree on what the value is because the market will determine that for you.  Whatever the house sells for is what the value is.

So, there is no reason to do an appraisal unless knowing the value is going to be a factor in your decision as to whether to sell or to hold onto the house.

The other option to split equity is for one spouse to retain the house and the other spouse to be bought out.  The spouse retaining the property needs to find a way to get the out-spouse their fair share of the equity.

Using one million dollars as an example of the amount of equity, each spouse may be entitled to $500,000. The person retaining the house would need to find a way to pay the other spouse their $500,000 share of the equity.

They can do that in a couple of different ways.

If there are other liquid assets from the marriage, you can forfeit those assets to the out spouse to credit towards that $500,000 buyout amount.  You may be able to use cars, jewelry, collectibles, retirement accounts or other assets.

The other way to pay a spouse is to refinance the property.  This allows the in spouse to pull out excess cash and use it as part of the buyout.

If you’re the one keeping the house, let’s say you have agreed to a specific buyout amount, but there are no other assets to cover that amount.  The way to pull proceeds from the property is through a refinance.

It’s no different than when you first bought the property and you put a loan in place. You went through that mortgage process. A refinance is another mortgage process, which would enable you to pull out enough funds to satisfy your obligation to your spouse.


Other considerations of a cash-out refinance in a divorce

If you’ve agreed on how to split the equity in your house prior to finalizing a divorce and you want to pull the cash out now, before a settlement, there will be a slight increase in your mortgage interest rate as a result of pulling cash out of the property.

The way to eliminate that increase in the interest rate when you’re pulling cash out is by refinancing after the divorce is final.

Once the divorce is final you can pull equity from the house and as long as that cash goes directly to your ex-spouse through escrow under that refinance.  If it’s dictated in your settlement agreement, the lender will not penalize you for taking cash.  That’s because technically you’re not taking cash out. You’re buying the property from your spouse.


Delaying a sale is another option to consider when splitting the house

In some cases, there are reasons why someone will not sell the house.

They may have no way of refinancing the property, or they won’t sell it because as parents, they have agreed to keep the kids in the home.  There is always the option to retain joint ownership after a divorce takes place.

You can put off the issue of how to split the equity proceeds until a later and more convenient date.  You still have the option of selling the property outright or having one spouse buy out the other when it makes more sense to do so.