Real Estate Division in Divorce- What Happens to the House Jointly Owned by the Couple?

Real Estate Division in Divorce

Research from the Pew Research Center shows that for most people, their home is their most important asset.  More than 80% of adults agree that buying a home is the best long-term investment a person can make, and confidence in the housing market was only slightly disrupted by the real estate crash in 2008.  It is no surprise, then, that the family home will be a central dispute in most divorces.

It is hard to split a house

To state the obvious, it is hard to split a house.  A divorced or divorcing, the couple rarely wants to live together.  At the same time, a house is often the most expensive asset a couple owns.  There are three main options for dividing real estate in a divorce. First, the couple can sell the house and split the proceeds.  Second, one spouse could keep the home and refinance the mortgage into his or her name. Finally, the couple could continue to own the house jointly indefinitely.  

It is hard to split a house

Selling is easiest but often disfavored

The first option is the easiest.  The couple can simply put the house on the market, sell it at the market value, and then split whatever cash is left over after paying off the mortgage and other settlement costs.  It is important to remember that society treats real estate differently than most other assets. If somebody breaks a contract, for example, they are forced to pay money to fix the damages they caused by breaking the contract.  

In contrast, a person that breaks a contract is generally not forced to complete the contract.  Forcing someone to complete a contract is called “specific performance,” and it is almost never used except for in real estate.  Every piece of real estate is considered unique and not something that can be replaced by money. This is an idea going back hundreds of years.  The flip side of the “specific performance” rule in real estate is that courts hate to force families out of their homes. Instead, judges will take steps to preserve a family home where possible.  

One spouse can buy the house

If a couple has kids, they often want to keep their kids living (at least part-time) in the house they are used to.  Having one spouse take over ownership of the house is very complicated, though. The first thing is that one spouse has to be able to afford it.  Even if the spouse that wants to take over can afford the mortgage, the next issue is that the spouse taking over must be able to pay the other spouse’s equity.  

The couple might need to share the house

Sometimes, the couple needs to keep the status quo in place.  For example, maybe the house is underwater and cannot be sold for some time.  Perhaps the couple wants to keep the children living in the home, but one spouse cannot afford the house alone.  In this situation,the house may just stay like it is with the couple splitting payments, and someday down the road, the couple will sell and split the proceeds.

Want to have a happier, healthier marriage?

If you feel disconnected or frustrated about the state of your marriage but want to avoid separation and/or divorce, the marriage.com course meant for married couples is an excellent resource to help you overcome the most challenging aspects of being married.

Take Course