Divorce is extremely stressful, and one of the worst aspects of the divorce is figuring out how to split important assets – like your house. If you and your partner shared a house in marriage, how do you split it in divorce?
The Options for Shared Houses in Divorce
Owning a house together isn’t especially complicated. Both of you will pay half the mortgage, both of you earn half the equity, if you choose to sell the house, you can split the proceeds or buy a new one with the cash, and if an issue comes up, either one of you can deal with it.
Splitting a house after a divorce is a more complicated affair. You may have disproportionate levels of financial or time investment in the property, you may have different interests in the property, and you may have other assets that are equally complicated to split.
Generally speaking, you have three main options for how to manage a shared house in divorce:
- Sell the house and split the proceeds. The most straightforward option is to sell the house and split the proceeds. If you and your spouse have an equal investment in the property, and you mutually agree to have an equal split, you can sell the house for its market price, use that money to pay off the loan and pay for any other expenses, and then split whatever money remains after this process. If you take a direct cash offer for the house, this process is quick, easy, and straightforward; you’ll get an offer right away and can get rid of the house in a matter of days in most cases.
- One spouse keeps the house. It’s also possible to have one spouse keep the house, which is a viable option if one partner is especially interested in keeping the property. In this scenario, you have a few different options for how to manage the split. The most commonly selected path is for the person retaining ownership to refinance the home under their name only, so they can free up cash to pay off the existing mortgage and compensate the other spouse for their share of equity. There are alternative options as well, such as compensating the other spouse for the loss of house with distribution of other assets.
- Both spouses maintain ownership. It’s also possible for both spouses to retain ownership of the house – at least temporarily. This is usually a viable option only for spouses who have children and plan on coparenting or those who want the kids to stay in the same neighborhood. This can be a somewhat messy arrangement, so make sure to stipulate the terms of the arrangement precisely.
How to Navigate Shared Home Ownership in Divorce
How should you decide how to navigate this complex situation?
- Prioritize living separately. As most relationship experts can tell you, it’s a bad idea to continue living in the same space if you have broken up, especially if you’ve split on bad terms. Even if you want to move forward on solid footing as coparents or friends, it’s important to spend some time apart immediately after the split. No matter what you choose to do with the house, at least one partner should move out of it as soon as possible.
- Review standing paperwork and laws. Before you start making any decisions, review any standing paperwork you have in place and look up the laws in your area. For example, if you have a prenuptial agreement in place, it may dictate what happens to the house upon your split. The same is true if you have a postnuptial agreement in place. Marital property laws vary from state to state, so it’s also important to understand how the laws in your area apply to your marital property. Be sure to speak with a lawyer if you’re confused about anything or if you need professional guidance.
- Avoid rash decisions. In the aftermath of divorce, people are likely to make impulsive or emotional decisions. But your house is a very valuable piece of property, so it’s important to make this decision logically and rationally. Avoid any rash, gut decisions, and take your time thinking through all the possibilities.
- Consider hiring a mediator. Divorce is frequently handled with the help of adversarial lawyers, but this can be more expensive and more stressful for both spouses. If you feel like you can resolve you are split amicably, consider hiring a mediator, who can present you with multiple options and help you peacefully negotiate.
- Calculate home equity fairly. When considering each partner’s equity, or ownership stake in the house, make sure you calculate this value as fairly as possible for both parties. If both of you contributed equally throughout the partnership and equally to this house purchase, the math is pretty straightforward. But if only one partner held an income and that partner was the only one making payments on the property, the math might shift. The math may shift even further if the other spouse didn’t have an income because they were busy taking care of the children.
- Don’t forget about extra costs. When running the numbers, don’t forget about all the extra costs you incur when selling a house. Unless you’re taking a direct cash offer, you’ll be responsible for paying real estate agent fees, closing costs, and the costs of supportive services like home staging.
- Optimize for convenience. Divorce is already messy and stressful, so you shouldn’t make it any more complicated. Most couples benefit from making this process as convenient and straightforward as possible. Get an offer as soon as you can, minimize the individual effort required, and move on to more important things.
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