Divorce: What Happens to the Marital Home?

Frequently neither party wants to move from the home even while a divorce is pending. Eventually, however, a home must be distributed like all other assets.

Dividing the marital home in a divorce is one of the most difficult aspects of property distribution. The house is often the most valuable asset owned by the parties, and it is the one that often has the most sentimental meaning as well. Couples spend a lot of time and effort choosing a home and filling it with memories, and frequently neither side wants to move from the home even while a divorce is pending.

Eventually, however, a home must be distributed like all other assets in a divorce. It is simply a question of how that is accomplished.

When both sides agree

First, both people can agree that one of them keeps the home and buys out the other person’s interest. To do this, the house needs to be appraised by a certified real estate appraiser to determine fair market value.

Alternatively, the parties can agree on a fair market value. To determine the net value subject to distribution, they must then deduct the amounts of any outstanding encumbrances on the home such as mortgages. In some jurisdictions, real estate commissions are also deducted in determining net value even if the person keeping the home has no immediate intention to sell it.

Once the net value is determined, the person keeping the home will need to pay the other person his or her share of the value. This amount may be paid outright in a lump sum, paid over time (perhaps with an interest component added) or offset against other assets. The person keeping the home will also need to refinance or otherwise remove the other person from exiting encumbrances on the home.

When there’s disagreement

If the sides cannot agree on who should keep the home or neither person can afford to keep the property, they can agree — or a court will often order — that it be sold.

This is not as simple as it may seem. First, a real estate agent has to be agreed upon or appointed by the court. Then a listing price needs to be determined, with a methodology for reductions if the house does not sell immediately.

Even more difficult is determining how expenses will be paid and who will pay them while the house is on the market. Frequently, if one person is not as enthusiastic about selling the home as the other and is still residing in the home, he or she could try to block the sale by failing to keep the home in showable condition or impeding showings. That is why it is crucial that a specific agreement or court order with penalties for breach govern the sale of the home.

Although dividing and distributing the home is difficult, it can be made much easier if both sides can remain objective. Real estate is plentiful, and a new house can be made a “home.”  As such, sometimes the best decision is not to fight over the home but to move forward.