Dividing Real Estate in Divorce
– So you’re going through the Big D (and we don’t mean Dallas). Let’s face it. Divorce can be complicated and emotionally stressful. One of the most important assets of any divorce is the marital residence. Dividing assets can be difficult and real estate can be among the toughest to figure out. While the real estate doesn’t get sold in every case, weighing out all of the options is important. The biggest thing to do in dealing with real estate in a divorce is to determine the value of the property and there are a few different options when it comes to determining the market value of the property.
The first is to utilize the services of an appraiser. The average appraisal ranges anywhere between $300 to $500 for a real estate transaction or for a refinance. However, an appraisal on a property for the purpose of a divorce can cost more primarily due to the potentially litigious context. Thus, more time and effort must be put in by the appraiser. In some instances, both parties of a divorce may hire their own appraiser to assess the value of the property.
The second method is to utilize the assessed property tax value. While not usually 100 percent accurate, the assessed value on average will be 10 to 20 percent lower than the property’s actual value (but this will vary from one county to the next). Most tax assessors offer an online website as a free resource to find the assessed value of the property.
Last, but not least, is to enlist the services of a realtor to complete a Comparable Market Analysis (CMA) on the property. Most realtors will offer this type of service for little to no cost (but they do want the listing). The comprehensive market valuation compares the home to listed area comparables and recent sales and then adjusts the property’s value based on specific features.
Factoring in Equity
While gaining an idea as to the fair market value of the property is great, equity is the true driver for the actual value of the property to the parties. Take the real estate value that was figured and deduct any encumbrances against the property. These include the mortgage, second mortgages, secured lines of credit, delinquent property taxes or home equity loans.
Title vs. Mortgage
If a name appears on the mortgage and not on the deed, then that person has no ownership interest in the real estate. Only a responsibility to pay the debt against the property. A name on the title (deed) is considered as the legal owner of the property. We find that many homeowners have confusion on this topic. Some even seek to remove themselves from the title in order to get out of the mortgage (which, in fact, does not remove them as a debtor on the mortgage).
In the case where one party gets awarded the real estate, then the other party is still reflected as a signor on any loan against the property until it is refinanced. Often when the property is refinanced the person that is awarded the real estate will take out funds against the house to pay off the other parties’ equitable interest. Other options include paying off the other party over time or sale of the property and division of the proceeds.
A divorce property settlement can be tricky since the home is usually the biggest asset to be divided. Seasoned real estate professionals should be familiar with dealing in real estate tied up in a divorce. Many agents suggest that the divorce not be advertised to potential buyers. This is because the buyers may feel that they could negotiate more or place a lower priced offer since they believe that the owners are trying to offload it and get on with life (separately). Some real estate agents will stage a home when a couple has divorced so as not to reflect only the man’s or women’s items around the home. For example, if the man moved out, then cologne and shaving cream may be placed on the vanity counter with some men’s clothing items in the closet.
Estate SalesDividing Real Estate in Divorce