Three Ways to Split the House in Divorce

Reblogger Shannon Coe
Real Estate Agent with Keller Williams

This is an older blog on Divorce and splitting up property. It is even more difficult in 2012 because many folks do not have equity to split or ability to refinance. There is the Harp program but that may not be a good option. There is also the option of a short sale. That could be a solution for homeowners who are quite a bit upside down and it does not make sense to try and keep the home. I know that some people are choosing to just wait it out and hold the property as investments until the market returns.

Here in Northern California we are in a shift and prices are starting to rise. May be at a slower pace than the past but Real Estate is still a good investment and when the market is in this state of flux you might just choose to not split but hold.

Northern California Realtor

Shannon Coe #01489731

Allison James Estates and Homes


Original content by Carol Ann Wilson

Three Ways to Split the House in Divorce
By Carol Ann Wilson, CFP, CFDP

1. Sell the house and divide the profits that remain after sales costs and the mortgage is paid off. It is important to consider the basis in the house and possible capital gains. Also, if your client wants to buy another home, determine if he/she will be able to qualify for a new loan

2. One spouse buys out the other spouse's interest in the house. This can be done by trading another asset for the interest in the house.

The first step is to determine the value of the home. An appraisal should be done. The fair market value of the house minus the mortgage will show the equity in the house.

What if the wife decides to keep the house and she finds within a short time that she cannot afford to keep it and she puts it up for sale? Should you consider subtracting selling costs and capital gains taxes from the value in the beginning? These are issues that definitely should be considered.

What if the wife wants to keep the house and there is not another asset to offset the value? She could refinance the house to withdraw enough cash to pay off her ex-husband. But that means she now has a higher mortgage payment. Can she afford a higher payment?

Instead of refinancing the house, she could owe a sum to her ex-husband, which is paid off over time (a property settlement note). A note should include reasonable interest, and it should be collateralized with a deed of trust on the property. A problem with this arrangement is that it keeps the ex-spouses in an uncomfortable debtor-creditor relationship.

Another problem with buying out the other spouse's interest is that the non-owner spouse's name stays on the mortgage. Even though the husband may quit-claim the deed to the wife, his name remains on the mortgage. If she decides to stop making the payments, he is still liable. This may impact his credit.

3. One spouse keeps the house for a certain time period, say until the children are out of school, and then the house is to be sold and the proceeds divided. This creates a tie between the ex-spouses that they may not want. But is does allow for the "out-spouse" to be able to also take a $250,000 exclusion from capital gain.


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Shannon Coe

916-597-3818, Lincoln, Rocklin, Loomis, Roseville
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