In any divorce situation, one of the most major and complex elements to be dealt with is the division of marital assets. As the marital home is typically the largest asset of divorcing couples, it's important to know your options.
The most common dispositions of the marital home is that it will be sold, or one party retains it. There are other options. But, for the purpose of this blog, these are the two options that will be discussed.
SELLING THE MARITAL HOME: Often during a divorce, neither party is able to retain the marital home, and the home must be sold. It may be that neither party can afford the mortgage on their own, or neither party can afford to refinance to buy the other party out of their equity in the marital home. If you and your spouse have decided that selling the marital home is necessary, the first thing you must do is to agree on a date to list the marital home. Additionally, you must agree on a realtor, a list price, and eventually a sale price. Typically, the proceeds or deficiency would be divided equally between the parties. There are many exceptions to this rule, such as one party having special equity in the marital home, or one party receiving more than one half of the equity for various reasons.
ONE PARTY RETAINS THE MARITAL HOME: If one party will be retaining the marital home, then an appraisal should be completed by a licensed appraiser. That appraisal will give the parties and their attorneys a basis in which to appropriately value and make a division of the equity. Equity is determined by taking the current appraised value and subtracting the current outstanding loan(s) on the property, leaving you with the equity in the home.
If one party is retaining the marital home, they will be required to "buy out" the other party's one half of the equity. This can be accomplished by either refinancing the marital home, or providing the equity from another source in the assets of the marriage, such as retirement account. As a very simple example: Party "A" wishes to retain the marital home, and has a retirement account worth $100,000. Each party is to receive $50,000 of the retirement account. The equity in the marital home is $50,000. Party "B" is to receive $50,000 for their share in the retirement account, and $25,000 for the equity in the home. Party "A" would then pay party "B" $75,000 from their retirement account for payment of the retirement account and equity in the marital home. Of course, this scenario requires a retirement account balance large enough to accommodate payment of the equity, after the division of the retirement account.
Yet, another "buy out" option of the other party's equity in the marital home would be to make payment of the equity over time. This would require the parties to agree to post-divorce installment payments, or a lump sum payment at a specific time.
As the decision regarding the marital home is a complex subject, it should be fully addressed with a qualified family law attorney.
Laurie Schmitt of Schmitt Law, PLLC is a West Michigan family law attorney specializing in collaborative divorce as well as separation, divorce, child custody and support, paternity, and other family law litigation. She is licensed by Michigan State Bar and the U.S. District Court for the Western District of Michigan, and has extensive advanced training in divorce mediation and collaborative divorce. Contact Laurie at (616) 608-4634 for a confidential consultation.