A house can mean a lot of different things to different people. For you, your home may mean stability. It can also represent an important asset, or consistency for your children during a difficult time. You may love your house for its proximity to your work, your family, or your children’s school. There are many reasons why you may want to hold onto your home during a divorce. (But first, ask yourself, “Should I Keep the House?”)
If you owned the home before your marriage and are the only person named on the deed, or if you received the home as part of an inheritance, keeping the home will be easy. It clearly belongs to you. However, most couples purchase a home together and are both named on the deed. In this case, you will need to negotiate with your ex-husband or ex-spouse and determine the best way to move forward. Oftentimes, if you have primary custody of your children, you can make the case that staying in the home will give them more stability and allow them to stay in their current schools.
Once it is decided that you will stay in the home, your ex may not be exactly feeling generous enough to just pack his bags and sign over the deed to you. He will likely expect you to buy him out of his share of the house.
A buy-out can work in a variety of ways, depending on your specific situation and how well you and your spouse can negotiate together during the divorce process. Usually, the buy-out is included in your divorce settlement.
Determining the Value of the Home
First, you’ll need to determine the value of your home so you have an idea of how much you will need to pay your spouse. This may be as simple as looking up the home’s value on a real estate website, like Zillow.com and agreeing on a price. These websites are not always completely accurate, so you may want to ask a real estate agent what they think, or shell out a few hundred dollars to have a professional estimate completed.
If you and your spouse cannot agree on a value, you may need to bring the matter to court and let a judge decide.
Some states allow you to deduct part or all of a standard broker’s fee from the buying price of the home, since you will have to pay a full broker’s fee if you should ever sell the home. Check with your divorce attorney to see if this is allowed in your state.
Another thing to consider is the current state of the house. Does the roof desperately need to be replaced, or have you been ignoring the need to replace old, run-down appliances? If there is some serious upkeep needed pronto on the house, you should try to negotiate a lower buying price with your spouse. If possible, get quotes for repairs or new appliances, and see if you can deduct that from your ex-husband’s selling price.
Exchanging Spousal Support
Coming up with the money to buy out your ex-husband’s share of the home may be difficult (though we’ll discuss how to do that in the next section of this article). If you have trouble raising the money and are entitled to spousal support, you may be able to exchange future spousal support payments for a lower buy-out price. This will require your ex-husband’s consent, but he may consider it a benefit not to be on the hook for future spousal support payments.
How to Perform a Buy-Out
Most women don’t have a hundred grand or more on hand to pay out to their ex-husbands. A buy-out is usually performed by refinancing the home and taking out a new loan in only your name. For example, let’s say that your home is valued at $400,000, and you owe $250,000 on it. That means you have $150,000 of equity in the home. When you refinance, you borrow enough to pay off the $250,000 that you owed together, and to pay your ex-husband half of the equity: $75,000. You can set it up just like a sale to a third party, so that your ex will sign the deed over to you, and the escrow company will transfer all the funds, including the buy-out amount to him, during the “closing.”
Make sure you do a title search before you agree to the buy-out to see if there are any liens on the home. You don’t want any surprises once the home is yours!
Have more divorce questions? Well, we have more answers for you in our divorce article archive!