Uncategorized October 14, 2023

Dividing Real Property in Divorce

The marital home often represents the most valuable asset in divorce proceedings, and its disposition significantly impacts the post-divorce financial well-being of both parties. In addition to the marital home, other real property owned by the couple requires careful consideration. Several steps must be taken to determine the best course of action.

  1. Value Assessment: Before making informed decisions about real property, it’s essential to understand its value. Spouses may not always agree on a property’s value, but this doesn’t necessitate litigation. Parties can agree on a value determined through third-party verification.
    • Tax Assessed Value: While tax assessments are updated annually, they often lack accuracy, with discrepancies of 10 to 20 percent.
    • Realtor Market Analysis: This approach assesses a property’s value based on area-specific data, including recent sales of similar properties.
    • Professional Appraiser: The most accurate assessment often comes from a professional appraiser. The cost of their services may be split between the divorcing parties for a swift and accurate property valuation.
  2. Equity Determination: Equity denotes the portion of the house available to the parties. It’s calculated by subtracting the property’s outstanding mortgages or loans from its estimated value. In divorce court, equity determination typically excludes closing costs and associated expenses unless the property is to be sold as per divorce directives.

    After determining the total equity, it’s crucial to distinguish between marital estate equity and separate property equity. For instance, if one spouse owned the property before marriage and its value increased due to marital investments, the division wouldn’t necessarily be a 50/50 split. The appreciation since marriage may be subject to division, while the separate property interest remains with the original owner.

  3. Asset Division: Knowing the property’s value and each party’s equity stake paves the way for discussions on equitable asset division. Options include:
    • Allowing one party to retain full ownership or occupancy of the property. In this case, the other party deserves compensation for their interest, which can be accomplished by awarding other assets of equivalent value.
    • Compensating the departing party over time if the marital estate lacks sufficient assets for immediate compensation.

    If one party retains ownership, removing the other party’s name from the deed and mortgage is essential to avoid obligations related to future property sales and debts. Refinancing the mortgage may be necessary.

  4. Property Sale: In some instances, the only viable solution is to sell the real estate. The sale’s expenses and the payoff of any encumbrances are subtracted from the sales price to determine net proceeds. These proceeds are then distributed to each spouse in proportion to their equity interest. Parties may agree to sell the property at a later date, such as when the youngest child completes high school.

Navigating these steps ensures a comprehensive approach to handling real estate in divorce cases, facilitating fair and well-considered property division.