Jointly owned real property is almost always where the money is in divorce cases. For this reason, it is also the biggest contention in a divorce, especially if there are minor children involved.
In Maryland, the court will order the property to be sold UNLESS there are minor children involved, or if specifically requested in a Complaint or Counter-Complaint to have the court consider allowing one party to “buy-out” the other party’s interest in the home that they lived in during the marriage. If the parties jointly own rental property or vacations homes, the court can only order the parties to sell the property. However, if one party owns the property in his or her sole name, then the court CANNOT order the property to be sold.
If there are minor children involved, it is possible that the court can order that prior to a “buy-out” occurring, or selling the home, the primary caregiver parent can be awarded use and possession of the marital home for up to 3 years from the date that the parties are divorced.
With the above in mind, here are some tips regarding how to handle real property if you are heading for divorce court:
1. Sell now, divorce later
If there are no minor children or if there is not an issue as to where the children will live if the house is sold, it is recommended to sell the jointly owned house before filing for divorce. If not, the house could be used as leverage. It is also easier to divide cash than it is to divide a house. Selling the home ahead of time will also remove this primary source of divorce drama.
2. Consider the future risk/benefit
As hard as it is, try to look past the value of the home and consider the bigger picture. There is more to owning a home than just the fair market value. If you want to keep the house because it is worth $500,000, ask yourself, is it really worth this much after you factor in all the extra costs?
3. Take the emotions out of equation
Take the personal feelings out of the home. I know this is something that is easier said than done, but moving on is a must. Removing emotion is one of the hardest parts of any divorce, but by doing this you will be able to make the best financial decisions during the process of the divorce. Emotions and feelings will change over time, but the decisions made based on those emotions and feelings will remain the same.
4. Re-do the mortgage
In many cases, one spouse will essentially buy out the other spouse’s portion of the house. Problems may arise when the bank is not a party to this agreement and doesn’t agree to remove one former spouse from mortgage. This leaves the spouse who did not get the house in a somewhat unpleasant position. They have no legal interest in the house, but his or her name is still on the mortgage. If the spouse living in the house stops making mortgage payments, the house can be foreclosed upon. While this may not seem like a problem to the spouse who did not get the house, it will become a problem when they finds out the foreclosure will destroy their credit rating.
The best course of action, if possible, is for the party getting the house to apply for a new mortgage in their name only. The first consideration is whether there is any equity in the home. If this is the case, a party may be able to get a loan and use the equity as a down payment on the new mortgage, assuming other party is in agreement. If parties owe more than the home is worth, meaning they are upside down, it may be difficult to get a new loan on the house. It may be also be a problem if the spouse getting the house does not have a good credit score to qualify for a new mortgage without their ex’s income.