Attorney Matthew R. Arnold answering the question: “Is there some property that the judge cannot divide?”
A common problem in divorce concerns what will happen to the house. One common problem that many couples discover is that if one person receives the house in the divorce and does not refinance this can wreak havoc on all parties, potentially preventing the other spouse from applying for a mortgage due to the additional debt and also linking the two together in the event that the person responsible for paying for the house defaults.
To help solve this problem, divorcing couples should carefully map out their property-division plans, paying special attention to what happens with the marital home. The following are some tips for what to do if you’re facing similar problems.
1. What if both parties want to sell the house?
This is the most straightforward of all possibilities. No bickering or complicated refinancing, the couple simply needs to agree on a listing price, a schedule for showing the home and then a plan to divide any expenses involved in the sale of the house. Once the home has been sold, the couple needs to distribute the proceeds in whatever way was agreed on in the divorce decree. If the house sells at a loss, then things can get messy as both parties are eager to move on from the money pit. However, careful planning can ensure that language is written into your divorce agreement saying that any profits and losses are split following a sale.
2. What if one person wants the house?
In this case the person who wants the home should try to refinance it on their own. This is made easier if the house has equity. If so, then the home can be refinanced and the spouse who keeps the home can simply pay an equalization payment to the other party, giving them their half of the equity in the property. If the person keeping the house cannot afford to refinance on their own then a serious conversation needs to be had about whether it’s worth the risk to allow both parties to keep their name on the place or, instead, whether the property should simply be sold.
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