Divorce real estate FAQ: Real Estate Advice for Divorcing Couples
Can I get exclusive occupancy while the divorce is pending?
It depends on whether the judge has a reasonable basis such as domestic violence or something like that. Normally, a judge can’t just put a person out of their home. If living together during the pendency of the divorce is unbearable, one of you could agree to move out but be careful as this can result in two payments for residences and you have to ask yourselves if you can afford it. Also, if you move out without any rhyme or reason, you can end up inadvertently forfeiting certain rights. So be careful with moving out when you are just beginning the divorce process.
Should I fight to keep the house?
It depends. Is there equity in the house or just debt? Can you afford the mortgage by yourself or even with spousal support (which will probably be less than when you two were together)? What about the upkeep and taxes? Is it a huge house that is too much house for one adult? You really have to ask yourself the tough questions and if it does not make sense, don’t keep the house. For more on this specific question, check out this post.
How can I be sure the appraisal for the house is accurate?
You can’t always be sure. But get a couple of appraisals from reputable appraisers to be on the safe side. Look at different metrics. How is one appraiser valuing a particular characteristic vis a vis another? What are the comparable home values/sales in your area? What is the assessed value of the property as per your most recent report from your town municipality? If all else fails, what does the judge think is the fair market value after reviewing all the information?
My name is not on the deed or mortgage. What are my rights to the property?
If the property was bought during the marriage, absent a prenup or post nup to the contrary, it is marital property and it does not matter if your name is on it or not. You are still entitled to a share of the equity if there is any
We have multiple homes in different places and countries. How do I protect my interests?
As best you can. Sometimes, depending on where the property is located and how the ownership is structured (example if it is bought in a corporate name) it can be very difficult to ascertain ownership and get your fair share. You will need investigators, court orders and if you can get your hands on them, copies of deeds and mortgages, business tax and personal tax filings and as many documents you can proving the existence of the properties and their dates of acquisition – as a threshold matter. Whether you have an interest will also depend on any marital agreements you have signed.
I am the only one who paid the mortgage during the marriage. Should I get a bigger proportion of the sales price?
Maybe. It depends on the jurisdiction. If you are in an equitable distribution state, it is quite possible the judge will think it is “fair” that you get a bigger slice. But the mere fact that you paid the mortgage alone, by itself, is not always going to be decisive. The judge will look at the full story of your marriage in making a determination of how the property should be distributed. For example, if your spouse was a stay at home spouse who took care of the children, or who is past a certain age or something like that it is even possible the judge could award the house to your spouse irregardless of the fact that you paid the mortgage. (“irregardless” is not an English word, I know.)
Can I keep the house till the kids are grown and then sell it and split the proceeds with my ex?
Sometimes, yes. The courts often allow these types of arrangements so that the children’s lives are not too disrupted. But it is not always going to be the best option. It depends on your situation. Talk to your lawyer about it and make a decision based on all the variables in your personal situation.
Can we partition the house and my ex lives upstairs and I live downstairs?
Hey, if you and your ex are not mortal enemies after the divorce and you think you can handle this arrangement (especially when you start dating and bringing home other people) without jealousy and other issues, then go for it. Why not?
Who is responsible for capital gains tax if we sell the house?
First of all, you are both entitled to exclude $250,000 of capital gains for a total of $500,000 even if you sell the house at a gain when you divorce. So usually, the average home sellers do not pay a capital gains when they divorce, unless you are talking about very expensive real estate. There are many affluent people who divorce and recognize huge gains from the sale of property when they divorce and then the question of who pays the cap gains will come down often to an agreement between the two. Usually the two spouses are responsible jointly and severally for the cap gains tax when the house is sold if they are both on the deed and file joint returns unless you have an agreement where this responsibility is offset by another. However, note that normally the IRS is not subject to your agreements or even to court rules. If there is a problem with the payment of the tax later on, the IRS can and will come after either or both of you for the money. http://www.divorcenet.com/resources/divorce/capital-gains-tax-sell-house-divorce.htm#
How is the capital gains tax calculated?
If you can sell your property for more than you paid, you may owe both Federal and state capital gains tax after your $250,000 exclusion as a single woman. (Two important notes: 1) This $250K exclusion is applicable only to your primary residence, not your vacation or investment real estate, 2) Federal capital gains taxes were just raised and can now range from 15 to 23.8 percent.)
Here’s a simple example to illustrate my point. Let’s say the appraised fair market value of your house is $1,000,000. You have a $400,000 mortgage and you originally paid $200,000 for the house. Your selling costs are 6 percent or $60,000.
The $1,000,000 sales price minus $60,000 selling costs = $940,000.
Since your original purchase price was $200,000, $940,000 – $200,000 = $740,000 profit.
$740,000 profit – $250,000 exclusion on primary residence = $490,000 capital gains.
For simplicity, let’s assume your total capital gains tax rate is 20 percent. $490,000 capital gains X 20 percent = $98,000 capital gains tax due.
So . . . What do you end up with after the sale? $940,000 after selling costs minus outstanding $400,000 mortgage minus $98,000 capital gains tax = $442,000