Should I keep or sell my home after a divorce?
The most important issues are whether you can afford continuing payments and whether you need to cash out equity in the home. There are emotional issues but those should take a back seat to cold, hard logic. The fact is that many people become impoverished by making a wrong decision to hold onto a house. Houses are temporary and can be replaced. The money you need to start a new life may be hard to come by and selling a home with equity may be your best move.
Should I Keep My House or Sell After a Divorce in Florida?
For many couples, the marital home may well be the single largest asset in the divorce. Most couples own their home jointly—although there will certainly be those who came intothe marriage with a home and never added their spouse’s name or co-mingled the asset in any way. If you jointly own your marital home (and probably have a mortgage), the issue of whether to keep or sell the house can become one of the biggest decisions in the divorce. In many cases, one spouse remains in the home and the other moves out during the process of the divorce. Even if the spouse remaining in the home intends to sell or refinance at some point, this usually does not happen immediately. There are a number of issues you need to consider during your Florida divorce regarding keeping or selling your marital home. Some of these issues include:
- Disentangling yourself as quickly as possible. Depending on your situation, your Florida divorce attorney may counsel you to do whatever it takes to disentangle your day-to-day living situation from that of your spouse. While there are the rare few couples who can continue to co-own a home, there are many others for whom this type of arrangement simply won’t work. Assume you agree to stay in the marital home with your minor children for five years—until the children have all graduated from high school. At that point, the house will be sold and the proceeds divided. Although in theory, this might be a workable solution, in practice, how will you feel if your ex spends the next five years constantly complaining about how you are taking care of the house (the shrubs aren’t trimmed, he or she doesn’t like the color you painted the house, etc.). You are likely to find this invasive, while your ex may feel since the house is still technically half theirs, they have every right to dictate what you do or don’t do to the house. In most cases, whenever possible, it is a better idea to disentangle yourself from your spouse as efficiently and quickly as possible.
- If you hope to get the marital home in the settlement, there are a number of things to consider. First of all, can you afford the mortgage on your own? Almost every divorced person underestimates what it will cost to pay all the bills on their own. Sit down and map out a realistic budget, and determine whether or not you can afford to stay in the home, taking into account property taxes, utilities and regular maintenance and upkeep. Next, you need to determine whether you will really be happy staying in a home you and your ex lived in together. Will there be bad memories for you? Will you ever feel that this is truly your home rather than the home of you and your ex? Should you decide to sell the home later, is there enough equity in the home to make it a good business deal for you? All of these are very important questions, that require well-thought-out answers.
- If you are the spouse who has decided to leave the marital home once a divorce is in the works, there are issues you must consider carefully. First of all, if your name is also on the mortgage, consider what would happen if you trust your ex to continue to pay the mortgage and he or she defaults? If this were to happen, your credit would be damaged in the same manner as your ex’s. If you are planning to buy your own home, consider whether a lender will be inclined to loan you money when you are still obligated on your marital home mortgage. A final note of caution if you are contemplating moving out of the marital home; creditors can downgrade your credit score when multiple addresses of short duration are shown.
- How much is your marital home worth? Before you make a decision regarding your marital home, as far as whether to stay, leave, sell or keep, it is a good idea to have the home appraised and see exactly where you are, financially. If you and your ex are on good terms, you can save yourself some money by going online and seeing what comparable homes in your neighborhood have sold for. If yours is an adversarial divorce, then you may end up with “dueling appraisals”—one from you and one from your ex.
- Consider capital gains tax. Today, a married couple will receive a $500,000 exclusion from gain, so capital gains tax is not so much of an issue as it once was, unless you have a higher priced home. Selling your home during a divorce means both spouses can exclude the first $250,000 of “gain” from any income which is taxable. Vacation homes are not eligible for capital gains exclusions; your principal residences is a home you have lived in for a minimum of two out of the five years before you sell the home. Capital gain is your home’s selling price, minus the expenses associated with the sale, minus your adjusted “basis.” Basis can be difficult to figure, but is essentially what you paid for your home with pluses and minuses for tax benefits and improvements. If you bought your marital home less than two years ago, you will not be entitled to the capital gains exclusion. If the two of you decide to co-own the house, but you will not be living there, then you could potentially lose your $250,000 capital gains exclusion when and if the house is sold.
- If one spouse buys out the other’s interest in the marital home, only one of you has to worry about capital gains. If you are the spouse who is selling your interest in the marital home, then you don’t need to consider capital gains, since the sale of the marital home is considered a part of your divorce. If you are the one buying your spouse’s interest in the house, intending to live in, and later sell the house, then you will be subject to capital gains when you sell—although you will receive the $250,000 capital gains exclusion.
- Should you consider a divorce lien? If either you or your ex will stay in the marital home, then a divorce lien can be implemented. The spouse who will stay in the marital home will give the other a promissory note, secured by the deed of trust or mortgage to the house.
- What if finances dictate you must continue to live together in the marital home? While this may sound like an unworkable solution to the question of what to do with the marital home, a slow economy has forced some couples to do just that. Perhaps you and your spouse are upside down on your mortgage. You can’t afford to sell the house until it becomes worth more, and you can’t afford to live in separate residences. If your home is big enough, this could be a workable solution—depending on how contentious the relationship is, and whether there are children involved. Some couples continue to live in the marital home precisely for the benefit of the children, to avoid splitting the children’s time between the parents.
Financial vs. Emotional Aspect of Keeping or Selling the Home
While the marital home is an asset, and should be treated as such, in many cases it can be extremely difficult for the spouses to be emotionally detached about the home, particularly when they have lived in it for ten, twenty, thirty or even more years. Perhaps this is where you raised your children and made lasting friendships with your neighbors. Perhaps your home’s location puts your children in a great school district, which you would not want to lose. Perhaps the home is close to your work, or maybe the home simply represents stability to one or both of you. When emotions are hindering the more practical, financial aspect of selling the marital home, it could be necessary for one or both spouses to speak to a forensic accountant or divorce financial analyst. Having a neutral third party review the numbers can help the spouses understand the economic impact of keeping/selling/staying in the marital home.
Does Moving Out of the Marital Home Constitute Abandonment?
Although in some states, the spouse who moves out of the marital home could later be accused of abandonment, this is not the case in the state of Florida. In Florida, either spouse is allowed to move out of the marital house with no danger of the court raising the issue of abandonment, since Florida law fails to address the issue. That being said, being the one to move out of the marital home could give your spouse the opportunity to remain in the marital home asprimary caregiver of the children. This could then be considered when the court is determining custody. The court may decide it is in the best interests of the children to remain in the marital home—with the parent who stayed there. This means that while moving out doesn’t directly affect your property rights, it could indirectly affect who will remain in the home following the divorce. If you are the one who moves out of the marital home, your spouse is not allowed to change the locks or lock you out of the home without a court order in place.
Determining Whether It Makes Sense to Keep the Marital Home
There are instances when keeping the marital home simply makes sense, whether financially, or from a practical standpoint. Some of those instances include:
- If you have minor children at home who are settled into a school district, it could make sense to stay in the marital home simply to provide stability for them.
- If you have a fixed rate mortgage with a low monthly mortgage payment and relatively low property taxes, it might simply make good financial sense to remain in the marital home. You might have difficulty finding another place to live which will be as inexpensive as where you are currently living.
- If you have enough assets to buy out your spouse, and you like your home and want to stay there, then it could be a good idea to stay in the marital home from a purely financial standpoint.
- If you want to stay in the marital home and can easily refinance, buying out your spouse, then staying in the home could be a reasonable solution.
Likewise, there are instances when keeping the marital home may make sense to you emotionally, but really does not make sense from a financial standpoint. These situations include:
- When you need the cash from the sale of the marital home to start a new life;
- When you don’t have the cash to buy out your spouse;
- When your children are grown and gone and you don’t really need the space, or
- When your marital home is big and expensive, and you could not afford the upkeep, taxes and mortgage payments.
It is almost always a better option for you and your spouse to come to a reasonable decision regarding the marital home on your own, however this is often simply not possible. In an emotionally-charged divorce, the marital home can become one of the many issues to argue about. As noted, the marital home is often the biggest asset owned by a couple, and the ability of either or both the spouses to move on with their life can be dependent on getting money from the home. If you really want to stay in the home, then you need to have all your ducks in a row as far as refinancing, or showing the court you have a reasonable budget and can financially afford to keep the home. Your Ayo and Iken divorce attorney is your very best resource as far as determining whether to keep or sell your home following your divorce—use this resource to your advantage.