In many marriages, the house is the biggest asset. In others, it can be the biggest liability. Either way—asset or liability—the way the house is handled in divorce is a really big deal. Whether you want it, he wants it, or you just want it gone, the marital residence is a biggie.
Whether you want it, he wants it, or you just want it gone, the marital residence is a biggie. Whether it was the home you brought your first child home to, the first big purchase of your adult life, or just the one place where you truly feel relaxed, a house is an emotional as well as a financial consideration.
Whether you hate it and it’s full of bad memories, or whether it’s so far underwater you’re afraid you’d never actually make money on the thing, it can be a pretty scary undertaking, too. Finances change in divorce. I feel like that’s a Captain Obvious kind of thing to say, but it’s true. It’s very difficult to maintain the same standard of living post divorce, no matter how good your financial adviser is.
Regardless of how things go down, you’ll still have to take the money that currently exists and use it to support two separate households. In some cases, that means you can’t afford to keep the house even if you’d like to. After all, it’s about more than just whether you can afford the mortgage payments. It’s whether you can refinance after you pay him back his share of the equity, and whether you can cover taxes, insurance, and general upkeep, too. In other cases, it means you’ll have to bring money to closing rather than get money from closing. It’s complicated, and the situations can seriously run the gamut. Today we’re going to talk about selling the house in Virginia divorce. What happens when you own it together, when just one of you owns it, and how to go about selling or keeping or splitting or whatever it is you plan on doing. It may seem complicated at the outset, but there’s really only a series of things that can truly happen.
When you own the marital residence jointly
Most people own their homes jointly. It was an asset purchased and paid for during the marriage. If both of your names are on the deed and the mortgage, chances are it’s a joint asset. You’ll both have a say in what happens to the home, and neither of you can sell or refinance the home without the signature of the other spouse.
When one of you wants to keep the marital residence
If one of you wants to keep the marital residence, you’ll have to qualify to refinance. You’ll have to refinance for the remaining balance of the mortgage, plus whatever your spouse’s portion of the equity might be (unless, of course, you negotiate to provide the benefit of that equity from some other source, like a retirement account). When you refinance, you take the other spouse’s name off of the deed and mortgage, and assume it on your own. If you’re hoping to refinance, you may want to talk to a mortgage lender or a financial planner to help get your ducks in a row. If you’re expecting a child or spousal support award, you’ll definitely want to ask them what they’ll want to see in order to have your loan approved in underwriting. This isn’t typically a part of the process that your attorney will have much to do with, but I know I’ve heard that realtors want to see both an order or an agreement reflecting what your award of support will look like, and also a specific period worth of those payments. You know how difficult it is to get a mortgage; they always want to double and triple check you’ll be able to pay!
Remember, too, that there will also be closing costs. It may be that you need to figure out how to qualify for financing on that portion, too, or otherwise you’ll have to bring cash to close. The same goes for him, if he wishes to purchase the home from you. He will have to buy out your share of the equity in the home from the amount that he’s able to refinance.
When you want to sell the marital residence
A lot of couples choose to sell their marital residence. In a separation agreement case, we usually have provisions dealing with who’ll pay the mortgage in the meantime (or whether the parties will split it), how repairs will be handled (split 50/50, paid pro rata based on your incomes, or paid entirely by one party), and who can live there (one or both parties). If the case goes to court, these issues will often be handled by the judge. Usually, there are also provisions that say that both parties will cooperate with the advice of the realtor, will be diligent about showings, and so on, to help ensure that the sale of the home runs as smoothly as possible.
After the sale, proceeds are split. If there are no proceeds, we come up with how the parties will come up with the money necessary to close the sale.
When the marital residence is in one party’s name
Sometimes, homes are owned by one party separately. Usually, it’s because the home was purchased prior to marriage. A house can be a completely separate asset—say it was purchased by one spouse prior to marriage, and then during the marriage it was rented out the entire time, and no marital money went into maintenance, upkeep, or improvements to the house.
It can also be a hybrid (meaning part separate and part marital) asset. In that case, the house could have been purchased prior to marriage by one party, but then during the marriage if the parties made mortgage payments from marital money or spent marital money making improvements on the home, both parties would have an interest in it. Of course, the non-owning spouse’s interest is less than the owning spouse. The spouse whose name is on the deed and mortgage can make some unilateral decisions (like whether to sell or keep the house) without the input of the other spouse.
The judge can’t order a spouse to sell a house that is in one spouse’s separate name—but that doesn’t mean that the non owning spouse has no interest in it at all. Even if you’re the non owning spouse, to the extent that you contributed to the maintenance and upkeep of the home using marital money, you have an interest in the house (though that doesn’t mean that your interest is equal to the owning spouse’s).
The house is a big deal. What happens to it is emotional. Especially if you have children, too, making a move can be difficult for people other than you—and that can further compound some of the issues you might be experiencing already. Still, understanding how the law works, and knowing what you might be entitled to receive (or not) when it comes to the house can go a long way towards helping you plan for what’s going to happen once your divorce begins to move forward. For more information on the marital residence, or to find out what might happen in your unique case, give our office a call at (757) 425-5200.