Making major decisions is never easy. Making decisions while going through a divorce seems like an unsurmountable task. Yet people are faced with them every day. One tough decision most people are faced with when divorcing is whether or not to sell the house. For so many of us, the family residence is the largest asset (and/or debt) we have. The original decision to purchase the house was probably an exciting but frightening time in the life of the couple, usually early in the marriage. Love and sweat are poured into the place to make it a home, a home full of hope. Children are born, a family is created and memories are made. When the marriage ends, it is very difficult for some individuals to part with what they have built and face the reality of failed dreams.
So what does one do with the family residence, sell it, or not sell it? What are the options? The choices are: 1) sell the house and divide the equity (if there is any); 2) one spouse buys the other spouse out; 3) keep the house as rental property, and manage the property together; 4) allow one spouse to stay in the house until the children are grown and then sell it; or, 5) if financially possible, keep the house, let the children reside in it, while the parents alternate moving in and out during their custodial time periods, then sell the house when the children are grown, most commonly known as a “nesting agreement.” I’m certain with creative minds, there may be other options to consider as well, but those are the general choices. The most common are either to sell the house or one spouse buys the other one out. The hurdle with the latter choice is that the person keeping the house is required to refinance the property into their name, and add one-half of the equity to the new home loan so they can buy the other spouse out.
The decision made concerning how to handle the family home will depend on many factors, most prevalent of which is finances. If neither spouse can afford to keep the house, the decision is easy, sell. Unless there are extenuating circumstances, or the couple otherwise agrees, the home will be sold when the divorce is final. If there is an agreement to sell the property, there must also be an agreement on the choice of realtor, the listing price, the terms of the sale, etc. Most couples are able to move through this process without difficulty. If there is disagreement, the court may be forced to intervene and make decisions for the couple, usually with the help of experts. Whatever your decision, make certain you consult with an attorney and tax advisor to understand the legal and tax implications of selling the family residence.
Pamela Edwards-Swift, Certified Family Law Specialist, 2010, 2011, 2012, 2013 & 2014; Southern California Super Lawyer