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Who Keeps the House?

Hand Over HomeThe home is the largest asset for couples because the home most likely has some equity. Of course, the amount of equity fluctuates with the housing market. During the most recent collapse of the housing market, it became a case of taking losses and many couples that divorced saw their homes lost in the foreclosure process because neither party could afford the payments.

Now the housing market is on the rebound in Minnesota and that is putting divorcing couples in better positions to split the equity in the home. In the 13-county metro area, the Pioneer Press states that the median sales price has risen to $160,000, which is 14.3 percent higher than January of 2012. The market is finally thawing out and that means that home valuation being correct is going to be a priority in a divorce.

There are usually two scenarios that occur in property division of the marital home. One of the former spouses may be able to continue to live in the home and pay the other spouse their share of accumulated equity. Sometimes an interest in the homestead equity can be offset by awarding retirement accounts to the spouse who does not continue to live in the home. There are various adjustments that can be made to the value of these accounts. In other cases, the home may be refinanced in order to split the equity, but the other common solution is to sell the home and split the money. Either way, it is a must to determine the property value.

The first way to determine the value is through a professional appraisal. What it was worth during the housing bust may not be what it is worth now. It could be worth more or less. If the value is inflated, that could mean paying more than what a person should to live in the home. The opposite an also happen, which is when the tax-assessed value is too low. If it’s too low, the spouse that does not live in the home may not receive a fair amount of money. This makes it worth the cost to hire an appraiser.

If upside down on a mortgage (mortgage is more than the worth of the home), it may be worth arranging a short sale with the lender. This may occur when neither spouse can afford to refinance or stay in the home, but this action is up to the bank. However, a November 1 federal rule states that homeowners current on their payments are allowed to qualify for a short sale. Short sales are typically for those seeing a hardship and divorce is considered a hardship when it involves a change in finances.

When it comes to property division, your attorney can advise you of what to do and the options available. Finding the best solution for you can mean not taking on an expense that you cannot afford or losing the home when you need a place to live and the other spouse doesn’t.