Property division is one of the most difficult aspects of a divorce. Not only does it involve dividing bank accounts, investment accounts, and debts, but it also involves figuring out what to do with shared real estate. Whether you have a shared family home or several real estate investments, this process is not easy. It can be especially difficult when you and your former partner disagree on how to handle the property.
Below, we look at some of the options you have regarding dividing property, including how to buy out your spouse. Keep reading to learn more.
What To Do with Real Estate During a Divorce
Because California is a community property state, all property and assets acquired during a marriage must be divided equitably between the parties. This can be a challenge with real estate, especially when one person wants to keep the property and the other doesn't. Regardless of whether you own your property outright or have a mortgage, real estate typically represents a couple's largest asset. When a property has to be divided 50/50, balancing the scales to accommodate the home's equity is no easy task.
Buying Out Your Spouse's Interest in the Family Home
There are a lot of reasons someone might want to keep the family home after a divorce. Often when children are involved, one or both parents want to find a way for the children to stay in the home they are familiar with, at least part of the time. In other cases, someone may just like or have an attachment to the house and be unwilling to give it up. When this happens, the spouse who wants to retain the property must buy out the other party's interest in the property.
Buying out your spouse will involve a process of negotiation. First, the property has to be valued, and any mortgages or loans associated with the property assessed. Determining the house's value can be challenging. You will have to work with your former partner to come to an agreement on what the home is worth. If you are struggling to agree, you may wish to enlist the help of a real estate agent who can help you determine what the property is worth based on recent sales in your area. You may also need to hire an appraiser to get the most accurate valuation for the property.
When agreeing on the value of the house, you and your spouse may agree to adjust the final valuation to account for a number of factors, including:
- Work that needs to be done on the house
- The cost of refinancing for the buying party
- Future broker's fees
- Spousal support agreements
- Other property division issues
Typically, when one spouse buys out the other, the home will have to be refinanced in the purchasing party's name. When this happens, they will take out a loan that covers both the remainder of the shared mortgage and the rest needed to cover the agreed-upon buyout price for the property. This can take time.
In some situations, one spouse may immediately buy out their former partner's share of the property. This is preferable to many people because it quickly removes the financial connection between spouses. However, in some cases, the divorcing parties may agree to a gradual buyout that occurs slowly over time or one which will take place at a future date (such as when children graduate from high school or once the spouse buying the property has secured stable employment).
Alternatively, instead of one person buying out the other or selling the property and dividing the profit, some divorcing spouses choose to continue to co-own property together. This frequently happens when the divorcing parties decide to maintain the family home for the benefit of their children. This also happens in cases where the housing market is unfavorable, and the parties want to wait until the market improves.
Regardless of how you decide to deal with your shared property during your Orange County divorce, it is important that you work with an attorney during the property division process. The attorneys at Burch Shepard Family Law Group have experience handling complicated divorce issues and are prepared to help you. Reach out to our law firm today.