Sale of Marital Home in Divorce – Many Issues Involved

Many times the marital home is one of the biggest assets in a divorce case. While there are only three options in how to deal with the marital home, each option raises questions.

Option 1: One of the parties buys out the other party’s interest in said home. Some of the questions that must be discussed are:

1. What is the fair market value of the home?

2. What is the balance of the mortgage?

3. Is the spouse buying out the other party’s interest qualified to refinance the mortgage to get the other party’s name off the obligation?

4. Can the spouse buying out the other party’s interest come up with the funds to purchase the other party’s interest?

5. Do you know whether there will be capital gains, and if so, are you willing to pay the tax when you ultimately sell the house to a third party down the road?

6. Are there major repairs that need to be done that you will be solely responsible for after the house is transferred to you?

Option 2: Sell the house to third parties. Some of the questions that must be discussed are:

1. When should the house be listed, with whom and for how much?

2. Should the listing price be reduced by a certain amount or percentage after so many months if not sold?

3. Who is going to live in the house until sold?

4. Who is responsible for the mortgage, taxes, insurance and utilities until sold?

5. If one party is paying the mortgage until sold, does that party receive a credit upon sale for the principal pay down of the mortgage?

6. How are the proceeds to be divided?

7. Who is responsible for major or minor repairs pending sale, and who is paying for them or how are bills allocated?

8. Who gets the mortgage interest and real estate tax deduction on their tax returns, or how is it allocated?

Option 3: One party will continue to live in the house for a period of years, and then the house will be sold. Some of the questions that must be discussed are:

1. What triggers the sale of the house (i.e., a child graduating from school, either party wanting it sold, a certain number of years pass)?

2. Who has exclusive possession of the house until sold?

3. Who pays the carrying costs of the home until sold, and does that person get a credit when the house is sold for principal payments on the mortgage?

4. Who is responsible for major or minor repairs?

5. How are the proceeds to be divided?

6. What happens if the party responsible for the mortgage and taxes does not pay them?

7. Does either party have the right of first refusal to purchase the house before a third party can purchase it?

These are just some issues that must be considered and determined when deciding on how to deal with the marital home upon divorce.