Many divorce actions involve real estate owned by one or both parties. Through the divorce process, you will discuss and hopefully agree upon the ultimate division of the real estate, which may include the property being sold or one party “buying out” the other party’s equitable interest in the real estate. If the parties cannot agree upon the division of the real estate, the Judge will make a decision regarding the same after the divorce trial.
If the parties decide to place the real estate on the market for sale with the net sale proceeds being divided between the parties, the value of the real estate will be established upon the sale. It is important to clearly define the costs/expenses (e.g. pay-off of the mortgage/HELOC, any remaining real estate taxes due, broker’s commission and other costs related to the sale) that will be paid prior to the division of the sale proceeds between the parties. Additionally, to ensure a timely sale of the property, I suggest that the divorce agreement outline a specific deadline on which the house must be placed on the market for sale, as well as identify an agreed upon real estate broker who will be listing the property for sale. The divorce agreement should also specify the party who will be paying the operating costs of the property until the sale, who will have use and occupancy of the property prior to the sale, and an allocation of payment of any staging/repair costs relative to the sale. Furthermore, the divorce agreement should include language requiring each party’s cooperation in the timely execution of documents and in making any necessary adjustments to the listing price in order to ensure that the property is timely sold.
If the parties have agreed upon, or wish to explore the possibility of, one party buying-out the other’s party’s equitable interest in the real estate, first you must establish the fair market value of the real estate in question. This can be done by agreement of the parties or through a valuation completed by an experienced real estate appraiser. The real estate appraiser can be hired jointly by the parties or by one party individually, if the parties do not agree to complete a joint real estate appraisal. Generally speaking, the real estate appraiser will view the property, research comparable sales in the area, and make an opinion as to the estimated market value of the property. Additionally, if there is a mortgage associated with the property, the party that is retaining the property must have the ability to remove the other party from any mortgage obligation associated with the property within a reasonable amount of time. Therefore, it would be appropriate to communicate with a mortgage broker to confirm that this would be possible.
The division of real estate upon a divorce will have lasting consequences. As such, it is important that you are fully informed of your rights and the many issues related to the same.
- Jennifer R. Silva, Esq.
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