Stay or Sell: Divorce and Your Marital Home

Marital homes

Marital Homes are typically the most important asset couples must agree on when they divorce, and the decision is not always black and white.

There are two factors that influence the decision couples ultimately make about their home: their children, and whether either of them can afford the home on a single income. Hanging on to a marital home can be important if the couple has children close to graduation, and the decision may be easy if one or both spouses can afford the home. But, what about when affordability is in question? Can one spouse buy out the other? Should you sell?

Staying versus selling

Staying versus selling the home is a big decision and both have benefits and consequences. In the current real estate climate, where monthly rents are equal to or greater than median mortgage payments, selling a home can be more of a risk than staying. When considering selling and factoring in realtor commissions, moving costs and security deposits, and what each spouse may net in profit, selling may not be beneficial, or wise. There are also financial implications if the couple obtained down-payment assistance from HUD or borrowed it from family, and, if the home is sold prior to the five-year residency requirement for owner-occupied property, a capital gains tax can further complicate finances and taxes.

Since opening my practice 14 years ago both divorce and the decisions couples make, have changed. Divorcing spouses are more cooperative, forward thinking and thoughtful about with their choices, and their post-divorce relationships are focused more on helping one another rebuild than tearing each other apart… And they reap the benefits. Any myths that a home must be sold, or couples cannot make any decisions until they’ve gone to court are false. Divorcing couples have numerous options about how to handle their home, including when and if the home is sold or refinanced. Creative short-term refinancing, selling or refinancing in the future with contingencies, preserving equity and co-ownership, and adjusting child support when one parent pays housing costs are just some of the options couples have to positively leverage their asset, avoid financial hardship or losses, and benefit their children. Mediation, in particular, gives couples the power to decide what is best for them practically and financially.  The same process of evaluation and decision-making also applies if couples have investment property.

The key to making the best decision depends entirely on how a couple approaches their divorce, the professionals they engage to help them, and the quality of the guidance they receive. All divorcing couples should understand every option available, the pros and cons of each one, and have time to evaluate before making a final decision. Prematurely applying for a mortgage, which typically includes a hard credit check, will lower credit scores and can limit a couple’s options potentially forcing a decision that may not be beneficial to either of them.