“What to do with the house” is often the most difficult issue for separating or divorcing families to resolve. There is no simple answer or formula. The problem is a complicated mixture of financial and emotional issues.
Generally speaking, the following are the four options to consider:
- Sell now
- Sell later, and one occupies with the children until sale
- Transfer ownership from one spouse to the other, with a refinance buy- out, cash payment or trade
- Rent it to a third party and share the income until sale
In court cases judges can order the house sold immediately, or they can order that one of the spouses (almost always the spouse who has residential custody of the children) stay in the house until the children graduate from high school, or some other time.
In Mediation and Collaborative Law, the parties, not a judge, make those decisions themselves.
For most families, the major questions to consider before deciding what to do with the house are:
- Can the parent staying in the house afford the expenses of keeping it up, even with reasonable child support and/or alimony?
- Are the parents committed to keeping the children in the same school district (If “yes” see #4 and #5 below)
- What would be the difference in the parents’ living expenses if the house were kept by one of them, or sold? Would it be cheaper to buy two smaller residences where both parents can have room for the kids?
If the present house is very big, or very expensive, it may be better for the family to sell, and then buy or rent two smaller, less expensive, residences in the same school district.
- Are the children very attached to the house? Have they lived in it all of their lives? Would it be overly disruptive or upsetting for them to move?
- Is other suitable housing available in the same neighborhood, at reasonable cost?
- There are other financial entanglements if both husband and wife are on the same mortgage. The non-residential spouse’s credit can be affected.
- Can the spouse who is staying in the house qualify to refinance in his or her own name, taking the other’s name off the mortgage?
- Does the house need to be sold to pay off credit card, or other debt?
Is the house undervalued because of market conditions?
- Would it be better to wait to sell the house when the market improves?
- What are the tax implications upon sale?
In Mediation or Collaborative Law the husband and wife can work out what is best for their family, rather than leaving the decision to a judge. They can come up with creative solutions that a court would never consider. For instance, I mediated a case where the family of four lived in a condominium apartment that that had been combined years earlier from two adjoining apartments. The couple agreed to split the apartments back into two. The kids slept in the father’s apartment, but had dinner in the mother’s.
I will discuss other aspects of “what do we do with the house” in future posts.