Dividing Real Estate in Divorce – What Happens to the House?

Divorces are rarely easy, and very few end with zero disputes over major assets. For most relationships, the biggest shared assets are related to real estate. Whether the marital home or investment property, those going through divorce often want to know, “what happens to real estate in a divorce?”

Date Property Purchased and Use During Marriage

The biggest part of the analysis for what happens to real estate after a divorce is when the property was purchased. If one of the parties purchased the property before the marriage, it might be considered a pre-marital asset that belongs exclusively to that spouse. However, if the property served as the home in which the couple lived while married, or as a source of marital income, the property may have converted to a marital asset subject to equitable distribution between both spouses.

In most states, it is possible to own property before a marriage and still retain exclusive ownership of that property. This is true even in the absence of an antenuptial (or “prenuptial”) agreement. The trick is that the property must remain exclusively a benefit of the owner spouse. If that spouse begins sharing the use and enjoyment of the property (or proceeds derived from the property, such as depositing them in a joint bank account), the solitary ownership interest may dissolve.

Property purchased after a marriage, or which is used for marital purposes (like serving as the house in which the couple lived) is generally an asset of both partners and the interest in the property must split in a fair manner (i.e., “equitably”) between the parties.

How to Deal With a House Without a Fight

If the two parties to a divorce are still civil and want a clean, quick, and simple break, selling a property is a great idea. The only issue will be how the proceeds are divided between the spouses and, unfortunately, this issue alone can become quite contentious. If the parties can agree beforehand, they may avoid considerable headaches when the property sells. Alternatively, having the attorneys negotiate or hiring a mediator may be other ways to determine an appropriate distribution of the cash from the sale. If all else fails, the judge presiding over the case will make a determination based on fact and law, but that removes the parties’ ability to come to a better arrangement between themselves and could end up leaving both parties unhappy with the outcome.

A common philosophy in determining who should get how much out of a home or other property sale is to look at how much each spouse contributed to the property. For example, if one party contributed 60 percent of the cash at the time of purchase, and later paid 40 percent toward the payments on the loan, that would be their relative contribution to the property. That can lead to a quantifiable figure that may be compared to a similar number produced by the other spouse. When the parties figure out the relative percentage of the total value each contributed, they can divide the proceeds of the sale accordingly.

What Happens if Both Parties Want the House?

When former spouses want to keep a property, whether out of financial need or spite, things can get much more tricky. If the other party is willing to walk away from ownership, the one who stays can simply “buy out” the other’s interest in the property. This also requires the departing spouse to be removed from any deeds, mortgages, or other rights or obligations on the property.

On the other hand, if both parties want to retain possession of the property, the matter must be decided by a judge. Often, the ownership will be granted to one party at the cost of certain other assets that party may have wished to retain. That way, neither party gets more out of the divorce than the other. However, this also means sacrificing other things which the spouse that keeps the property might have wished to retain. Thus, it is usually best, even under contentious circumstances, to attempt to resolve disputes over property ownership amicably rather than by going through court.

Legal Assistance

One thing should be clear: the process of distributing real property between former spouses can be complicated and fraught with peril. For that reason, it would be wise to hire a competent, experienced attorney to help with negotiating an appropriate resolution or taking the case to court to best protect your interests. You can find an attorney using the attorney search feature on HG.org.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.