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Throughout the divorce process, equitable distribution becomes a major factor. If a couple owns real estate, several issues must be decided; i.e., Will the marital domicile be sold? Will one spouse buy out the other? And, most important, if there are children, how will this affect them?
Keeping Your Home
I’m a Realtor who has “been there, done that”. I divorced when I had two sons eight years old, and one age eleven. At that time, the single most important thing to me was to keep some sense of stability for the children. Although I thought about selling, I decided to remain in the home with the boys. This was good and bad at the same time. Although I kept the home, it was difficult financially and every penny I made went into keeping that property.
In divorce, you should ask yourself these questions: If you were to keep the property, would you be able to maintain it? Would the utilities be reasonable for the size of your wallet? Would you still be able to maintain the quality of life you desire? These questions are extremely important.
If divorce leaves you well off financially and there are young children involved, I would suggest that you think about keeping the family home for their sake. Depending on your equitable distribution, this may involve one spouse refinancing to “buy out” the other. A mortgage lender would look at the appraised value of the property and the borrower’s ability to repay the loan (income vs. debt ratio). In an ideal situation, this could be easily accomplished. However, if you are financially unable to do this, your only alternative would be to sell the property and either buy something more manageable, or rent. Another factor for your consideration would be the memories (good or bad) associated with the property. Until you are financially able to make changes to the property to suit your personal taste, it will always feel like the “marital domicile”. Only you can decide if this would be acceptable. Can you overcome old memories? Are you able to create new and pleasant ones within those walls?
Selling to a Buyer or Your Spouse
Let’s say one spouse decides to buy out the other. The first step is to agree on a price. Value is determined either by having a formal appraisal done on the property (there would be a charge of $250 – $350 for this), or by having a comparable market analysis done on the property (this is a free service provided by a Realtor). Once the purchase price is determined, you would calculate the cost to sell (transfer tax, Realtor fees, mortgage balance, and approximately $200 – 300 in miscellaneous certification fees, etc.). Once all of those numbers are determined, you would then determine the equity. The purchasing spouse would then take their percentage of the equity plus the current mortgage payoff figure, and this is the amount of money they would need to “buy” the property. If this cash were not readily available, the purchaser would have to qualify for a mortgage in that amount. This is often cost prohibitive, in which case the real estate would have to be sold.
Only you can decide if this is the route you would like to follow. With so many things on your mind at this time, you may need help in determining what is best for you. A good Realtor should be able to help you determine pricing and the ability to qualify for a mortgage. Make sure you choose someone who is a full time real estate professional with a commitment to customer service.