In most divorce cases, the marital home is the largest jointly owned asset and is subject to division per the Texas community property laws. Unlike other community property states, Texas judges are not required to divide property settlements in a straight 50-50 ratio. Instead, assets can be divided in a “just and right fashion,” which means whatever the judge thinks is fair under the circumstances. In fact, in Harris County, where a lot of my practice is, it is not uncommon to see a 50-50 division.
Property division can however easily become complex and costly. The first obstacle is the fair market value of the home. If the parties cannot agree on the value, they must each gather evidence which supports their position. The best evidence for determining the fair market value is to have a certified appraiser do an appraisal. This costs from $400-up. If a party chooses this route, he or she must then be prepared to pay the appraiser to come to court to testify that the report he or she prepared was accurate. A less expensive route is to have a realtor run “comps” to see what comparable homes in the neighborhood are selling for. The third, and much less reliable, is to use the appraisal district appraisal in the county where the real property is located.
The best case scenario is to work out a fair and equal split of the marital home before heading to court. You have the following options:
Sell the home and divide the proceeds.
This is the best option if neither party wants and/or can afford the home or if you cannot agree on the terms, without presenting the case to the court. You will need to determine the home’s equity value. Equity is determined using the fair market value and then deducting any debts or liens that may exist. If the parties can agree on a realtor, the realtor will advise as to the sale price, and then help the parties negotiate the sale. Although the net proceeds can be divided any way the parties desire (because a court is not making the decision at this point), most parties choose to divide the net proceeds 50-50. If the parties agree to sell the house but cannot agree on how the proceeds should be divided, the net proceeds can be held either in escrow or in the trust account of either lawyer representing a party. This is the “cleanest” method of dividing the equity, because any disputes regarding the value are resolved when the house is sold for the agreed-upon price.
Have the spouse who wishes to remain in the home refinance the home and buy out the other party.
Choosing to retain the marital home can be an emotional decision. If you are considering buying your spouse out, you need to carefully consider whether or not you can afford and/or manage the following on your own:
Another consideration with this option is to be sure to factor the cost to refinance into the settlement equation.
Have one spouse remain in the home with exclusive use and possession for a specified period of time.
For example, the custodial parent may wish to stay in the house until the youngest child graduates from high school. When the specified time period is over, one spouse buys out the other or the home is sold and the proceeds are divided. Note: If your spouse wants to keep or stay in the house but cannot refinance, consider the following carefully before moving forward:
- Despite any and all terms of the divorce agreement regarding the house, as long as your name is on the mortgage, you are contractually liable and obligated to pay if your ex becomes delinquent with any associated payments, fees, or assessments.
- Any late or delinquent payment history will affect your credit history as well.
- Your ex may not maintain the home properly, reducing its value.
- With your name already on one mortgage, you may not be able to get financing for a new home for yourself.
If you cannot come to any agreement, then the court will decide for you. Let your attorney know right away which options you are considering. Your attorney can help you and your spouse find practical ways to address your issues.