On behalf of The Law Offices of Mary Ann Beaty, PC posted in Divorce on Wednesday, February 22, 2017.

During divorce, the spouse who was awarded child custody often buys-out the noncustodial spouse’s ownership of the house to avoid disrupting their children’s lives. This also helps prevent some of the uncertainty of the real estate market, if the house is put on the market.

But, these buyouts should be undertaken carefully. First, an appraiser should calculate the home’s fair market value because a real estate agent is not involved in this transfer. An appraisal is helpful to settle disputes over the home’s fair market value and may be used by the judge, if the dispute goes to court.

Real estate agents can inform families about recent sale proceeds in the neighborhood, which are also known as comps. This may be more accurate than making estimates based on other comparable homes or using online estimates.

The fair market value may be adjusted to reflect several items. These include deductions for the broker’s fee or the cost of any deferred maintenance. A selling spouse may also negotiate a lower buyout price to lower their child support payments.

Refinancing also plays a role. The purchaser may need a new mortgage loan in their name only, receives the loan to pay off the existing mortgage and the buyout. The selling spouse signs a deed transferring property ownership to the purchasing spouse and an escrow company or lawyer handles the paperwork and fund transfer.

Buyouts may pose risks to each spouse. The selling spouse may lose on any future appreciation on their home, while the buying spouse faces the risk of depreciation. The purchasing spouse may also acquire a barren asset that does not pay anything until it is sold and assumes expenses, such as taxes and upkeep, despite its appreciation.

Normally, the spouses negotiate the terms of the buyout as part of the divorce settlement. The purchasing spouse often pays the selling spouse after refinancing the house with a new mortgage. Other times, the purchaser trades other marital property of equal value to their share of the house, such as investments or pension.

The disposition of the house is only one of the many issues relating to property division. An attorney can help a spouse negotiate these issues and protect their interests in negotiations and legal proceedings.

Source: Divorcesousrce.com. “Negotiating a house buyout at divorce,” accessed on Feb. 21, 2017