One of the more complicated issues in a divorce is deciding what will happen to the family home.
Because it’s probably one of the most significant assets you own, a house is a lightning rod for financial and emotional issues that can complicate an otherwise clean divorce.
Deciding who gets the house in a divorce, if anyone, is determined by several things.
Here are the top five questions to ask to get you on the right path to reaching an agreement.
1. Is the house ‘marital property’ or ‘separate property’?
Before you can decide who gets the house in a divorce, you need to confirm that you have an ownership stake in the property.
Most of the time, both spouses do. You got married, bought a house, made payments together on it, and now it’s time to dispose of it.
There are also times when you already own a house, and then you get married. Depending on what steps you take, the house can remain yours alone. If the other spouse contributes, the house becomes a commingled asset, and both parties can claim it as a marital asset.
Once ownership is decided, then you need to determine how much of a stake each spouse can claim.
If you live in a community property state, each share is relatively easy to determine. Each spouse would be entitled to receive 50% of the value.
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.
If you live in an equitable distribution state (which 80% of the states are) then things get more complicated. 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.
Either you can reach an agreement with your spouse on how to divide assets, including the house, or a court will decide the matter for you.
It’s possible to go through some give and take, trading value in one asset against your share of the value in the home.
This can quickly get complicated. Most often it’s wise to consult a lawyer to help you strike a deal that protects your interests.
2. Do I (really) want the house?
This is a tough one. Emotions may cloud your decision.
Hanging on to the family home may be a psychological way of hanging on to your marriage, or at least the best memories of your marriage.
Those feelings can be especially strong if you’ve lived in the house for any amount of time. Countless small moments can be a powerful collective upwelling of emotions when faced with possibly losing the home where so much love has existed.
Birthday parties, holiday gatherings, movie nights in front of the TV, pets, kids, meals, doing homework, chatting it up with neighbors, and a thousand other activities will be hard to let go in many cases.
You have to ask yourself how much those memories are worth, and whether you can keep those memories alive, even if you don’t live in the house anymore.
From a practical point of view, keeping the house may be the best course to provide mental and emotional stability for your children. They are always the innocent victims of a divorce, unable to control their destinies until they are older.
But children are still intimately impacted by you and your spouse’s failures as a husband and wife. Keeping a stable environment could be critical to minimizing any long-term damage to their psyches.
If you ultimately don’t stay in the house for whatever reasons, and children are involved, it’s essential to know that kids are resilient. As long as you don’t actively involve them in the divorce, especially if they are younger, then you can minimize any damage to them. They will adapt, change, and bounce back in whatever circumstances they are in.
There is no absolute right or wrong answer on this one. Each person’s experiences will be different, just as their emotional state and relationship with the house will be as well.
Also, consider this house may 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. The counterbalance to an emotional attachment may be more than outweighed by many ugly remembrances.
From a more practical point of view, you may want to keep the house, but your finances will prevent you from doing so. The last thing you want to do is let your emotions write a check that your bank account can’t cover.
You’ve got to do the math and be honest with yourself.
Divorce is traumatic enough without compounding it by losing the family home after the fact.
It may not be your first choice, but moving to a smaller home, a condo, or renting until you can right your finances may be the best thing you can do for the time being.
3. Am I overpaying for the house?
If you rush into an agreement without doing your homework, you put yourself at risk for cutting an unfavorable deal.
How do you know what the right price is, either if you are the spouse buying or selling your interest?
It’s simple. Recognize that there is a process that will take some time. Unless you are selling the house outright and splitting the proceeds, you should go through a formal appraisal process. This ensures you don’t overpay for buying out your portion of the house.
Your attorney or a CDFA may be able to recommend a qualified appraiser to do the work. In most cases, spouses split the cost for this service.
It’s foolish to think that you can negotiate in earnest until you have an accurate value in hand.
Creating an accurate valuation, not only for your house but also for other assets such as retirement accounts, physical assets like cars, boats, vacation homes, jewelry, or fine art, is critical as well.
You can’t bargain and trade-off value for various assets until you know what the value of each asset is.
4. What factors will impact my decision to keep the house?
Deciding who gets the house in a divorce, or deciding to sell it and split the net proceeds does not happen in a vacuum. It’s woven into a settlement agreement and must be considered in an overall context.
This is where the give and take of an amicable divorce come into play.
Each spouse is going to have specific wants and goals coming out of a divorce. It’s important to decide what those goals are so that you can get what you want fairly and equitably.
Deciding who gets the house is tied closely to these goals. It’s pretty simple when one spouse wants to keep the home, and the other one does not. As long as you follow the valuation process for all marital assets, there’s no reason why you can’t reach an agreement in theory.
There’s still the issue of whether or not one spouse can afford to keep the house on their own, and you do need to consider that as part of the discussion.
When there’s disagreement, the court may need to step in and help the parties reach a final disposition on the house.
The court will have several things to consider, such as who has primary custody of the children and is it in their best interests to try and keep them in the house for the time being. A judge will also consider whether or not a spouse is entitled to alimony or child support. These can have an impact on the status of the house.
Specific laws vary from state to state, but judges may also take a look at the age, health, length of the marriage. They will look at the earning power of each spouse, and how all these factors may impact what to do with the family home.
Unless you can reach a reasonable agreement with your spouse, it’s best to consult an experienced family law attorney. He or she will be familiar with the issues and laws that are relevant so that they can be applied in your favor the best way possible.
5. What if we can’t agree on who keeps the house?
It depends on what you can’t agree on.
If you can’t agree on a buy-out price, then you can pursue a couple of options.
The least amicable of these is to put the house up for sale and let the market dictate what the price will be.
In a case where you or your spouse feels strongly about keeping the house, then you can have an appraisal done through one of several methods. This gives you an accurate price that will put your negotiations back on track.
A third option is to let the court, an arbitrator or a mediator decide or provide input for you. But you may not like what you hear.
Remember, courts will not only determine what is fair for each spouse; if children are involved, they will also put their best interests at the forefront.
A final option is to let things alone for the time being.
Turning down the heat can sometimes produce a more amenable spouse, especially as you decide on other issues, and the desire to move forward with your lives becomes more pronounced.
Recognize that you are going through a stressful period and your emotions will cloud your decisions. Putting actual numbers into the equation, getting help from outside sources who will be more clear-headed than you, and taking your time to reach an important decision about your house will all work in your favor.