For most couples who divorce, whether amicably or not, the house is their biggest asset. Between the added emotional attachment and the perceived upheaval that comes with children potentially having to move, the question of “what to do with the house” becomes a financial, emotional and parenting dilemma all wrapped up into one gut-wrenching decision.

The struggle is due to the fact that the house often represents “happily ever after” for couples symbolizing their original vision of their lives together, compounded by the new reality that the house is often the asset that can free up the most money to separate and move on.

It’s a conundrum that is well-suited for a mediation process, where these issues are untangled, concerns are heard, validated and considered. In mediation, there are no judgments handed down in a court of law, and everything is negotiable. Plus, in a mediation process, potential costs can be creatively worked into a settlement.

Let’s take a look at some common questions to consider when it comes time to figure out what to do with the house upon a divorce.

Who gets the house in a divorce?

Fortunately, state laws are in place to protect spouses in a divorce that help define what is considered marital property. In a community property state like California, it does not matter whether you or your spouse are on the deed or whether someone moved out first, for example. The more specific question of who gets to stay in the house is more complicated and requires consulting with an attorney who can advise on your specific situation and your rights.

Would you really want to keep the house anyway?

A few items to consider: 

  • One of the most common pitfalls overlooked is the fact that keeping a home often comes with a hidden price tag of deferred maintenance. Imagine you decide to keep the house, and a few years down the road, your home needs a new roof or hot water heater, costing you thousands.  This is why it is recommended to get a home inspection as part of your due diligence in deciding whether to keep the house upon divorce. This way there are no surprises.
  • You’ll also want to make sure there are no liens or judgments on the house by taking a look at the deed.
  • What’s the housing market look like? Get an appraisal and/or look at comparable home values in your neighborhood to get a solid idea of how much profit or loss would be sustained if you decided to sell right now.
  • Do you have valuable equity in your home? Determine how much you have already paid off of your mortgage and figure out if you could pull that cash out to make repairs or other uses important to moving on to your next chapter.

What happens when only one spouse is on the deed?

Upon divorce, it is a fairly common scenario to discover that only one spouse’s name is on the deed. Perhaps one partner moved in prior to the marriage and it simply wasn’t a priority to add the other spouse on the deed at the time, for example.

Upon divorce, it is a fairly common scenario to discover that only one spouse’s name is on the deed. Perhaps one spouse owned the house prior to the marriage and the other spouse was not added to the deed.  In California, this could involve what is called a Moore/Marsden calculation which involves sorting out a spouse’s separate property portion in the equity versus the community’s portion. Or there could be a Family Code section 2640 reimbursement issue.  It is strongly recommended that you consult with an attorney or a mediator well versed in these issues to explore your options.

How does refinancing after divorce work?

A mortgage refinance to achieve a home buyout upon divorce is a common negotiation strategy that allows one spouse to be relieved of the burden of homeownership while the other benefits from continuing on with life as uninterrupted as possible.

The first step is to see if you qualify for a mortgage and for how much. This is where spousal support or child support payments can play an important role, as this information will be asked on a mortgage application, and most reputable lenders also require a copy of your marital settlement agreement.  The number and length of payments, in addition to other sources of income and credit score are all considered.

Couples may settle on a mix of the above options to achieve the most advantageous settlement. For example, refinance a home buyout, allow the children to finish high school, then sell the house in a favorable housing marketing and divide the proceeds.

Most important, remember that every situation is different and there are many creative solutions to resolve the complexity of what to do with the house.  With separation and time, each conversation with your spouse, your professional and personal supports, and watching your children adjust, your next phase will unfold little by little. The decision will become clear and you will know what to do.

In reality, there really is not a best choice when it comes to deciding what to do with the house in a divorce. Hopefully, this gives you a better idea of what to expect. The decision comes down to a willingness to compromise and negotiate. If you’d like to learn more about our peaceful divorce solution, please contact me for a consultation.