For many couples, the home is one of their biggest assets and can become a serious point of contention during the divorce process. Who gets the house in a divorce? The question may keep you up at night before you ever file for divorce, but the answer depends on a range of complex factors. You and your soon-to-be ex-spouse have two basic options. You can divide your assets up amicably or let a judge decide for you at trial.
Who Gets The House in a Divorce?
Keep reading to discover which legal factors determine who gets the house in a divorce.
How is the House Awarded in a Divorce?
The House is usually awarded one of two ways in a divorce:
- The home is sold and the proceeds of the sale are divided between the spouses.
- Buy Out. One party is awarded the home and the other party is compensated for their share of the equity in the marital home.
If neither party wants to keep the home, the home can be sold and the proceeds of the home divided between the parties. This is especially common if the mortgage on the home is beyond what either party can afford on their own. Even when one party wants to keep the home, the Court may force a sale. The Court will generally try to award the home to a party that wants it. However, if the party that wants the home can’t qualify for a mortgage in their own name or afford the home on their own, the Court may force the sale. A sale can also be forced if there is a lot of marital debt and the proceeds of the sale of the marital home can be used to pay down debt so that both parties start with a clean slate.
Buy Out The Equity
If one party is awarded the home, the other party is compensated for their share of equity in the marital home. For example, assume H wants to keep the home. The parties agree the home is worth $300,000 and there is $100,000 left on the mortgage. The equity in the home would be $200,000. Thus, H is being awarded $200,000 by being awarded the marital home. H refinances the home and does a cash-out refinancing to pay W her $100,000 equitable share in the home. Both parties are now equitably compensated and now both the home and mortgage are solely in H’s name. This is just one of the common ways that you could divide the home in a divorce when a buyout is involved.
For further explanation of what is equity in a home see:
Although Sale or Buy Out are the two most common ways to divide the home in divorce proceedings, there are other alternatives in the right situation. These include nesting and rental arrangements.
Do the parties have children and find that a “nesting” arrangement works best for their family? Although nesting only works in very limited situations, it can be a good option for some families. The marital home would remain where the children reside and the parents would take turns staying in the marital home during their time with the children.
Rental To Spouse
What if both parties agree that one spouse should stay in the home, but that spouse can’t qualify for refinancing at this time or only wants to remain in the home for a couple of years longer? Especially if one spouse is being awarded sole physical custody of the children, both parents may wish for the custodial parent to remain in the home. If the custodial parent can’t qualify to refinance the mortgage into their name at this time, the parties could establish a rental relationship. The party that can qualify for the mortgage (or maybe the mortgage is already solely in their name) is awarded the marital home. The other spouse is compensated for their share of marital equity as explained in the Buy Out option above. However, that spouse then becomes a renter of the property.
A regular lease is entered into to give the custodial parent rights as a renter only in the property. This works only in limited, and generally must be relatively amicable, situations but can be an especially good option when the custodial parent just wants to remain in the home for a couple of years longer before the children emancipate.
Although a goal in a divorce is generally to end up with neither jointly titled assets nor jointly titled debts, it is possible to remain, joint owners of the marital home, after the Divorce Decree is entered. For example, the marital home could be used as a rental property to provide both parties a stream of income (hopefully). This may be a good option if neither party wants to remain in the home but there is some reason that now is not a good time to sell the marital home. Because of the further difficulties that owning a rental home together can cause, this should only be an option in exceptional circumstances.
How To Decide Who Gets The House?
In most cases, the parties eventually agree on who gets the house or agree that the house should be sold.
If you can’t reach an agreement, the Judge will decide at trial who is awarded the home or whether the home needs to be sold. Although the importance of the factors varies case-by-case and even somewhat depending on your judge, some of the most common factors to consider are below.
I Had It First
If one party owned the home prior to the marriage, the Judge may be more likely to award the home to that party. If the home was paid off (no mortgage) at the time the parties entered into the marriage, the Court may find it is a pre-marital asset and award the home to the original owner without any compensation owed to the other spouse.
If the home had a mortgage at the time the parties entered the marriage, the Court will generally find that the other party should be awarded some compensation, but usually at a lower amount than if the home had been purchased during the marriage.
For example, if the mortgage was paid down by $50,000 during the marriage, the Court might find that the other spouse should be awarded $25,000 as compensation.
Alternatively, if the home had $150,000 in equity at the time of the marriage and there is $300,000 in equity in the home now, the Court might find that the marital equity in the home is $150,000, even if the overall equity in the home is worth twice that. The Court would then award compensation of $75,000 as the “marital” share of the equity.
There are other formulas and methods to divide the equity in the home depending on the facts of the case. Also, keep in mind that major home improvements and remodels during the marriage can also create marital value even if one party owned the home prior to the marriage.
Sometimes it just seems fair to the Judge that the home should be awarded to the person that owned it before the marriage even started. Also, it is often just logistically easier to award the home to the party that had it first as the buyout to pay the other spouse is often reduced due to the pre-marital equity.
You Can’t Afford It
If there is a joint mortgage on the home, the Judge will generally order that the person who is awarded the home must refinance the mortgage within a relatively short period of time (often 6 months) to remove the other party’s name from the mortgage. If a party can’t qualify for refinancing in their own name, the Judge may decide that that party shouldn’t be awarded the home. This also applies to the mortgage. If it appears that you won’t be able to afford the mortgage on your own, the Court may decide against awarding you the home.
I Am The Custodial Parent
A divorce can be tough on the children. If one parent is being awarded sole physical custody, the Judge will often try to find a way to keep the children in the marital home. Although it can be precarious to rely on child support or alimony to make sure the mortgage is affordable, the Judge can take these into consideration when deciding whether the custodial parent can afford the home to try to keep the children in the home familiar to them.
You Moved Out
If you want to be awarded the home in the divorce, you generally don’t want to move out of it during the divorce process. In many cases, both parties want the home and both parties can afford the home and qualify for refinancing in their own name. Especially if the parties are also being awarded joint physical custody of the children, the tiebreaker is often who moved out of the home while the divorce action was pending.
There Is A Prenuptial Agreement
If there is a valid prenuptial agreement, the Court will likely honor its provisions regarding who is awarded the home, especially if the home was owned by one party prior to the marriage. Keep in mind that prenuptial agreements can be challenged. Especially when parties try to execute a prenuptial agreement without the assistance of attorneys, the Judge may find that the prenuptial agreement fails to meet the standards required for enforcement and find that the prenuptial agreement is not binding on the division of the assets and debts.
Other Special Considerations
Are there facts specific to your case that the Judge should consider when deciding who should be awarded the home? For example, does the home have special accommodations for your medical needs? Do you run an in-home child care and your established clientele is familiar with the home? Does the back of the home have a special workshop designed for your work or hobby?
Even in contested cases, the parties generally reach an agreement on who is awarded the home or whether it should be sold. The fight is more often about how much equity needs to be paid in the buyout when one party is awarded the home. However, that is a blog for a different day.
Law Office of Julie Fowler, PC, LLO | Divorce Lawyers Omaha
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