This question comes up in many divorces. Unfortunately, there is no one-size-fits-all answer.
First, the possibilities. In general, traditionally,
- one spouse retains temporary possession, usually with the minor children, and the house is sold and the net proceeds split at some future point in time, usually when the youngest child completes high school, here in Florida or
- sale to a third party and splitting of net proceeds or
- buyout of one spouse’s net equity interest in the home by the other spouse who wishes to remain in it
In recent years, foreclosure, deed in lieu of foreclosure, short sale and other similar options have expanded the list of possibilities.
Which of the above possibilities is best? This varies based on a number of variables in any given situation.
Such as fair market value, outstanding mortgage amount, amount of equity, appreciation since purchase, anticipated future appreciation, property taxes, property insurance, costs of maintenance and repairs, community fees and assessments, miscellaneous property expenses, the wishes of both spouses, and so on.
Anything overlooked? Yes! A big one. The total income of spouse in possession / spouse buying out the other spouse. And their creditworthiness (credit score and debt load amount). In other words, can they (reasonably comfortably) afford to stay in the home.
For this purpose, income can include both child support and spousal support if applicable.
But the spouse seeking possession must consider that sometimes alimony and child support are not consistently paid in full and on time. Indeed, sometimes, quite the opposite.
This can create stress … and threat of foreclosure. An especially bitter pill to swallow if more secure assets were bargained away in favor of the home.
All the possibilities and all the relevant variables should be carefully evaluated, preferably with the input of a financial professional, before settling on any course of action.
Read more in this New York Times article: Divorce and the Shared Mortgage .