By Nicole Smith
Almost all divorces include some type of property settlement. If you and your spouse currently own your primary residence, there are many factors you will want to consider when dealing with the home including whether you will sell or refinance.
The first question you must ask yourself is, “Do I want the house?”
If the answer is “yes”, you’ll then want to honestly ask yourself these questions: “Can I comfortably afford to keep the house using my own income or other means of support?” “Can I easily afford the monthly mortgage payment, and annual insurance and property taxes?” “Can I handle the expenses I will incur to maintain it, heat and cool it, and improve it?” And, perhaps most importantly, “Will it meet my needs moving forward?”
If the answer is “no”, or if the answer is “yes, but I can’t afford it”, does your spouse want the home and can he or she afford it?
If only one of you wants the home and is financially able to own it alone, you’ll need to figure out the fair market value and negotiate the equity (the difference between what a buyer would pay and what you still owe) that may be divided in the divorce settlement process. Whoever is considering retaining ownership will need to factor in the cost to refinance the mortgage and to “buy-out” the other spouse’s equity as part of the settlement equation. If the spouse who wants to keep the house is not able to refinance, then the spouse who is open to giving up ownership privileges should be very wary about moving forward under those circumstances. Even if your divorce agreement and the decree say that the spouse who gets the house also has to pay the mortgage, it is crucial you realize that this will not remove you from the liability and obligation to pay, and that any payments made late or skipped will ultimately affect your credit rating, too.
If you want the home and can afford it, you’ll need to voice your desire to your attorney/mediator and work through the details of determining who will retain the residence.
If neither of you wants or can afford the home, or if you cannot agree on the terms for one or the other to retain ownership, take steps now to sell the house. It’s that simple. Even in this market. Rather than spending valuable time and resources arguing in court over who is going to live there or how much potential equity there may or may not be, go ahead and sell the house now and divide the real equity under terms agreeable to you both.
Reprinted with permission. Nicole Smith, Real Estate Broker, is a Certified Real Estate Divorce Specialist with RE/MAX Masters in Southlake, Texas. You can contact her at (817) 310-5253 or (682) 472-2473; Website:www.NicoleSmith.net