What happens to your real estate in a divorce?

Divorce is a tough situation which opens up many emotional and financial issues to be solved. One of the most important decisions is what to do about the house.

Once you know how a divorce affects your home, your mortgage and taxes, critical decisions are easier. Neutral, third-party information can help you make logical, rather than emotional decisions.

Probably the first decision is whether you want to continue to living in the house. Will the familiar surroundings bring you comfort and emotional security, or unpleasant memories? Do you want to minimize change by staying where you are, or sell your home and move to a new place that offers a new start?

Only you can answer these questions, but there will almost certainly be some financial repercussions to your decision process. What can you afford? Can you manage the old house on your new budget? Is refinancing possible? Or is it better to sell and buy? How much house can you buy on your new budget?

Here’s your four basic options:

  • Sell the house and split proceeds: Your primary consideration under these circumstances is to maximize your home’s selling price. We can help you avoid the common mistakes most homeowners make which compromise this outcome. As you work to get your financial affairs in order, make sure you understand what your net proceeds will be.
  • Buy out your spouse: If you intend to keep the house yourself, you’ll have to determine how you’ll continue to meet your monthly financial obligations, if you now only have one salary. If you used two incomes to qualify for the old loan, refinancing on your own might be a challenge.
  • Have your spouse buy you out: If you are the one who is leaving, you have the opportunity to start again in new surroundings with cash in your pocket. However, be aware that if the the old home loan is not refinanced, most lenders will consider both you and your spouse as original co-signers to be liable for the mortgage.
  • Retain joint ownership: Some divorcing couples postpone a financial decision with respect to the home and retain joint ownership for a period of time even though only one spouse lives there.

One mistake divorcing couples can make is not examining and making needed adjustments to the homeowner’s insurance policy. Just because two people are married—and on the deed—doesn’t mean they’re both named as insured parties on the home. If one spouse is listed only as an insurance beneficiary and remains in the home, he or she will not be covered after the divorce is final. [REALTOR® Magazine]

If you and your spouse decide to sell your home, it will be important to work together through a professional to maximize your return. Differences aside, you both should be present when a listing contract is put together. Both of you should understand and sign this contract, and both should be active in the ultimate negotiations. Let us know if you have any questions about this process.

Tags: , , , , , , , ,