There are three ways to handle real estate during your divorce
1) Sell the house outright
(Divide the equity)
2) Buyouts
(One party buys the other out)
3) Deferred sale
(own the property jointly and decide on a time to sell)
Dividing the proceeds of a sale can help cover the down payment on a new home, assist with relocating or just provide a clean slate.
A divorcing couple can sell a house and use the equity to cover outstanding debts and other expenses.
In most cases the finalization of your divorce may be dependent on the sale of the house.
What to consider:
Try to think of your house not as a physical structure (or home)but as your largest financial asset or liability.
• Have a Professional appraisal done. This will set expectations for both of you and alleviate guess work or unrealistic pricing when put on the market.
Ask your attorneys about what assets are available, what your ideal outcome is, and plan to come to an agreement .
Ask real estate attorney to prepare a preliminary closing statement and walk you through what’s available to divide after a closing. Keep in mind that there are additional costs involved when selling a house. Spell out clearly what funds are used to pay for title insurance, HOA fees, Utilities transfer tax property and school tax.
A buyout usually consists of refinancing or one party obtaining a mortgage on their own.
The one buying the home can either apply for a new loan or line of credit. They may also borrow enough money to pay off the previous mortgage and additional money needed for divorce for repairs.
The big question is whether you can afford to keep it. You should contact your financial advisor or talk to a mortgage lender to help you make an educated decision.
You may find out you might not have sufficient income level to finance current home or maintain residences.
What to consider:
• Talk with a financial institution of mortgage broker.
• Work with an agent who has extensive experience working with divorcing parties. They will be well-versed in how to handle the added communications, emotional conflict, and other complexities involved with divorce home sales.
Ask what housing is available and what is affordable so you know what you’re looking at and mentally prepare.
Ask your attorney to review any agreement that specifies division of assets to avoid any pitfalls.
This is not typical but unusually occurs when both parties agree to sell the home at a point in the future. One instance may be to agree to sell once the children are finished with school. which would make for a more natural transition.
It is crucial that the mortgage payment is on time. This could negatively affect both of you. You could set up a separate account for housing that the mortgage automatically comes out. You could also earmark money for repairs or maintenance i.e. lawn mowing, new roof.
You’ll also want to consider how this will impact your ability to qualify for capital gains and tax consequences when the time comes to sell. You either get $500,000 per couple or $250,000 each.
Provided that you meet the “ownership test” (both people own the house) and the “use test” (that you lived at the house for two of the five years before the sale) regardless of your marital status.
One other consideration is 401(k) and Real estate do not have the same tax implications. For example if you trade an account that has
200,000 in it for a property worth 200 and you sell the property down the road you will be liable for capital gains netting you less.
What to consider:
Ask your attorney to outline specifically how the mortgage will be structured and how the deed will be changed, quit claim deeds are the quickest and easiest way to transfer ownership.
Check with you tax accountant or financial advisor regarding mortgage interest and capital gains implications
Chose a trusted professional who has experience. They don’t have an emotional involvement and They are there to assist you so that you can make an educated assessment.