Dealing with a divorce can be tough, but figuring out what should be done about the home you and your former spouse once shared can easily turn into a contentious and drawn-out battle. Fortunately, there are plenty of ways you and your ex can amicably walk away when it comes to your largest joint asset.
Sell the House and Split the Proceeds
Selling the house and splitting the proceeds of the sale between yourself and your ex is usually the most straightforward way of resolving your home ownership issues. It can be done quickly and it often gives divorcing couples a clean break without having to deal with unresolved ownership, mortgage and maintenance issues. The cash from the sale is usually held in escrow and distributed by the judge.
There are a few downsides to selling the house. For starters, you could run the risk of losing your home's value if you try to sell it during a market downturn; plus, there's no guarantee as to how long it could take to successfully sell the home. You could also end up paying capital gains taxes on the sale if the going price is high enough. However, the Internal Revenue Service lets you exclude up to $250,000 of the amount from your income and up to $500,000 if you file a joint return with your spouse.
Keep in mind that the amount you and your spouse will split may depend on the laws of your state. If you live in a state where your home is considered "community property," that means you and your spouse are entitled to half of the equity in the home. This means you'll have to split the proceeds 50/50 with your spouse. If you live in a state that follows equitable distribution when it comes to asset division, the courts may divide the proceeds based how much each spouse contributed to the marital home.
Negotiate a House Buyout
If you have an attachment to your home or if you still have children living in the home, you may be better off buying out the former spouse's stake in the house. This usually involves providing your spouse with his or her portion of the equity in exchange for complete ownership of the house. If the house has a mortgage, then the spouse will have his or her name removed as a guarantor, leaving you the sole person responsible for the mortgage.
You can buy out your former spouse's share of the house through a gradual process with regular payments and other stipulations or have it done immediately. A common way of buying out a former spouse's equity involves refinancing the home. This often involves borrowing against your own house's equity in order to pay the ex his or her share of the equity in exchange for buying out their share of it. The new loan will be solely in your name.
Postponing Home Divisions
The courts can also decide to postpone any division of the marital home until further notice. If you have children, for instance, the judge could award to the custodial spouse the right to live in the house until the children become of age (usually by turning 18 years old). A deferred distribution of home assets can help prevent children from being displaced from their familiar surroundings and help them grow up in a stable, functioning environment.
There's another reason why the courts may defer a sale and subsequent asset division. Holding the sale may give the selling spouse a better chance of surviving a soft housing market, where the seller could get less than the value of the home. If agreed upon by both sides, this can help them maximize their profits.
For more information, contact a company like Rute Law.