Who Gets the House in a Divorce?

Who Gets the House in a Divorce

During a divorce, one of the big things to consider is what will happen to your home. Your first thought may be to sell it as quickly as possible, but that can come with problems and timing constraints that may make you want to consider alternative options.

In some situations, you may not have a choice, and the courts will decide what happens, and neither party in the divorce may be happy with the outcome. It’s often best to sit down and consider what to do with large assets, including your home, so that both of you get the best possible outcome.

*Disclaimer: This content is for informational purposes only and is not and should not be considered legal or real estate advice. Always consult with a legal professional prior to decision making.

Who Owns The House After A Divorce?

You may be married, and both have been contributing to payments, upkeep, and even lived in the house for many years, but that doesn’t guarantee the house is owned 50/50 by both parties.

Your home may be considered separate property or marital property, but that will be determined by which state you live in. Some states are community property states, while others are equitable distribution states.

What Is Marital Property?

Marital property, including your home, is any asset that was acquired during the marriage, which includes all property such as the family home, vacation homes, and even rental properties.

What Is Separate Property?

Separate property could be property that you purchased prior to the marriage, but that doesn't always guarantee that it doesn’t become marital property; your state laws determine that.

Community Property States

Property that you acquired prior to your marriage and didn’t add your spouse to the title stays your property after divorce. However, if your home has appreciated, you may owe your spouse half of that appreciation.

States, where community property laws apply to are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

If you live in Alaska, then you had the opportunity to opt into community property before you got married.

Equitable Property States

All other states fall under equitable property laws, and your assets will be summed up and distributed between both partners, but that doesn’t mean you get 50/50 of the house; you may get the house while your spouse gets something else.

If you leave it to the courts, the distribution of assets will be done based on various factors, including your potential future income.

Who Gets The House In Divorce With A Prenup or Postnup?

If a prenup or postnup was signed, then it should detail who gets which assets after a divorce; in that scenario, it doesn’t matter which state you live in as the prenup or postnup dictates who gets the house and other assets.

Options For Your House In Divorce

There are a number of options for your house in divorce that should be weighed up to see which is best for both parties. If an agreement can’t be reached and the courts are involved, the outcome may not be good for either spouse.

Divide Different Assets

If you have a number of large assets, you can consider valuing them all and splitting the overall assets in half so that you may get the family home while your spouse gets the vacation property that has an equal value.

As long as you have a number of large assets and can come to an agreement, it can be a quick process, and you just need to ensure that you get a fair amount of the assets.

Buy-Out Your Spouse

You may want to keep the home for the kids or because selling in the current market isn’t ideal, but you would need to have access to funds that aren’t already being split with your spouse in the divorce, or you will need to look at some type of financing to get the funds.

You’ll need to come to an agreement on how much your spouse will accept for you to gain sole ownership, and you’ll need to ensure you can afford that plus any ongoing payments, such as solely paying the mortgage going forward.

Own The Home Together

You can continue owning a home together after the divorce, either waiting for a more favorable time to sell or even turning the home into a rental property and splitting the income.

You will need to agree on how payments for the house will be split and also understand that both parties are still responsible for the overall house and aren’t considered separate entities for things like credit scores.

It’s also important to check how capital gains will impact you if you turn the house into a rental property or own it but don’t live in it for two years or more and then try to sell it.

Sell Your Home

If the real estate market is favorable or the other options just won’t work, then selling the home and splitting the profits may be the option you choose. It provides a clean break and reduces connection from the other party.

Selling your home can include time and cost to prep the property for sale to get the best price; it may also not sell as quickly as you’d hoped, and you’re stuck in limbo waiting.

While selling the home can put cash in your pocket right now, you’re splitting the home's profits, which may not be enough for another house for either party, especially if the mortgage has been barely paid off yet.

One big thing to consider is that selling your home before divorce proceedings start is the simplest and easiest option. However, selling a home during and after divorce makes the process much more complicated, time-consuming, and costly.

Final Thoughts On Your House In A Divorce

Ultimately what happens to your house in a divorce can be up to both parties; if you can agree to a mutually beneficial scenario, that is often the best option for everyone.

If an agreement can’t be reached, then the courts will decide what happens to your house, and the laws dictating what happens depend on your state and whether you’ve signed a prenup or postnup agreement.

You also need to consider the tax implications of selling your house now vs. in the future, as both options can cause you to pay capital gains tax. Specifically where you haven’t lived in the home for at least two years in the past five years.

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