What Happens to the House in a Divorce?

Dated: April 19 2021

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Let's face it. Divorces are rarely easy. 

For most people in a marriage, their largest asset is the home. What happens to the home in a divorce? 

Texas is considered a community property state, and what that means is, any asset obtained after the marriage is the property of both parties. This means that any house or investment property that is purchased during the marriage is the property of both parties equally. 

So what happens? Two people decide to make a life together. They decide, after time, it's over. I am not an attorney. I am just putting out some information so that you understand what we can do with the home and the property in the case that we need to divide it. Any legal advice, you need to consult your attorney. 

There are basically four options when going through a divorce on what can be done with the home. 

Option 1:  The first option is dividing up all of the assets in the relationship. This means all the property is divided: the 401Ks, the savings accounts, the checking accounts, the property, the furniture, the cars, everything gets divided according to the divorce decree. At that point, if one spouse is awarded the home to stay in, they would need to refinance the home to get it out of the other party's name. Because the mortgage is a contract between two parties and the bank. The bank doesn't recognize the divorce decree as legal binding to their contract. So, the only way to get one's name off of a home would be the other party to refinance the home. This would need to happen if you are the party that's not staying in the home, or are no longer responsible for that property, you would want to get your name off of that mortgage as quickly as possible. Because if the party staying in the home decides not to pay, your credit could be affected as well. So, in the division of assets, if there is a mortgage, remember, whoever gets the home awarded would need to refinance, if there's a mortgage, to get the other party's name off of the mortgage. 

Option 2:  Another method of dividing the home is to buy out the other person. That would mean you figure out the equity in the home, or the shared interest, and you purchased the other individual's half. This is a better option if there are children involved that are used to a certain school, used to the community, have friends in the neighborhood, and it just keeps consistency as far as their lives are concerned. It's also a good option if, at the present time, the real estate market is not in a good situation to where some equity could be gained from the sale of the house. 

Option 3:  Another option would be to co-own the home. Say both parties decide that we have a mortgage, we're not going to split it, we're both going to own it. At that point, one could stay in the home, pay the other individual portions of rent, or make payments. Or say both parties move out, you could rent the property to another individual, or individuals. That way, you can continue to own the home, generate income. It could also help in your credit scores. If one or both individuals did not have the credit to go out and purchase another home or find housing another way, you could both own the home, continue to pay, continue to build that credit, and earn an income on the rentals to help pay for other housing or other expense. 

Option 4:  The last option would be to sell the marital home. Both parties would then divide the assets or be awarded the assets of the sale however is determined by the court. Selling the home offers a clean break for both parties. This means they're both walking away from the obligations of the mortgage and can start their lives over again in another place. Keep in mind, if you haven't owned the property for at least two years, there could be capital gains taxes that could be assessed upon the sale of the property for both parties. If you decide to sell the home, remember, both parties will need to agree to the sale price, both parties will need to agree to any improvements or repairs that need to be done to the home before the home can sell. 

During this process, it's recommended to hire a good real estate agent who knows the market, someone who can move the house quickly and get top dollar for both parties involved. The other consideration is someone who can remain neutral in the situation. Sometimes I've noticed in this industry, a party will hire a buddy to sell the house. Well, then the buddy is no longer the buddy of the other party that feels offended, or doesn't feel like they got enough for the house. And it just ruins relationships all over the community. So, my suggestion would be to hire an individual that either you both know but aren't personally involved, or find an individual that you can both trust that has your interest and the other party's interest in mind. 

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Anthony George

Growing up in a family business in rural southern Illinois, I learned the value of making relationships with my clients. Farmers from five neighboring counties knew me by name, and not only did I kno....

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