There are many decisions to make as part of your final divorce agreement. One may be the disposition of the marital home. Sometimes the marital home is a couple’s largest asset or liability in a divorce. New Jersey is an “equitable distribution” state, which means that courts will divide marital property equitably, though not necessarily equally. There are various ways to equitably distribute the family home. For example,
- Sell the house
You can sell the home and divide the proceeds. Sometimes this is the only viable option because neither spouse can afford to buy out the other and maintain the home after divorce. The proceeds can be divided equally or unequally. If there will be a deficiency you may choose to share the deficiency or foreclose on the home. There may also be other options such as a deed in lieu of foreclosure or a short sale.
- Buyout the other owner
Another option is for one spouse to buy out the other spouse’s equity. Either partner can agree to the value or an appraisal will be required to determine the present fair market value. In reaching a buyout amount, realtor’s commission, and other closing costs of the home when sold on the real estate market are not permitted to be deducted from the value. The final buyout price can be negotiated based upon other credits or affected by other assets/liabilities. Usually, the buying spouse will arrange to refinance the loan so that the other spouse no longer remains a guarantor on the mortgage.
- Continue to co-own the house
The third option is to continue to own the house together. This option is common when children are in school and it would benefit them to remain in the home. Generally, the primary parent will remain in the residence. However, it can be challenging for divorced spouses to cooperate in maintaining a family home over time due to the costs of continuing to maintain two separate homes and the relationship between the former spouses. Also, it can be difficult for the spouse who moves out to afford to buy another home if that party remains a guarantor on the mortgage.
Courts generally will not approve a request for sale of a marital residence while the divorce is pending, unless the home is in foreclosure or will soon be in foreclosure, or the family cannot pay the mortgage. This is not so for an investment property, and it is based upon the factors of the case. If you are contemplating divorce, consult with an experienced family law attorney regarding the financial aspects.