Establishing the Price for a Buyout of the Marital Home

In some divorces, one spouse “buys out” the other spouse’s equity position in the marital home.

How is the dollar amount of the buyout determined?

Very often the buyout is accomplished with a refinancing of the mortgage on the home, which removes the bought out spouse’s name from the mortgage, as the buyout removes the bought out spouse’s name from the deed.

As part of the refinancing of the mortgage, the lender will typically require a current appraisal. The appraisal is the most common means of setting the price for the buyout.

But a noted law professor makes a pretty good case that an inexpensive home inspection should also be conducted and serve as a “reality check” on the appraisal price.

How so?

Home inspectors focus on the condition of the internal “systems” in the home. Defects, damage, wear, poor condition are typically noted.

Repairs and curative efforts have costs associated with them, which can be factored into an appraised price to reach a more equitable buyout price.

In some cases, the results may spur a spouse to reconsider buying out the other spouse.

According to the professor’s research, failure to take account of such negative conditions is a common basis for the buying out spouse’s efforts to reopen divorce cases after final judgment.

Read more in this New York Times piece: Home Inspections During Divorces.