If someone were to stop you on the street and ask you where a person should look to determine the value of their home, what would you say? I'm willing to bet that you would say the same thing as I would- go online and see what the internet has to say about it. There are so many real estate websites nowadays where you can find a person to sell your house, search for a home to buy or even get quotes on mortgages. All at the click of a mouse or the tap of your finger on the screen of your phone.
One of the features of websites like these is also to tell you how much your home is worth. Enter your address into their search feature and it will tell you that your house is not for sale, but it will provide you with an estimate of its value. This is fun if done for entertainment purposes, but does it serve much of a purpose otherwise? Probably not. Using an online resource can probably get you close enough to the actual value of your home, but I wouldn’t trust it if you needed to figure out an official home value for your residence.
That is where you and your attorney need to come together to figure out how you are going to value your home if it is to be sold in your divorce. Your attorney should have some suggestions for you. I am going to go through a handful of sources that you can look to when trying to determine the value of your family home.
First, you can ask a realtor to do a market analysis of your neighborhood to get a value for you. These are done quickly and cost the realtor nothing to do. While I wouldn't go this route when it comes to putting your house on the market, if you just need a quick and dirty version of the home for mediation or informal settlement negotiations then you should be fine. You can send the realtor you choose some photographs of your home and analysis can be done without anyone having to step foot inside the residence.
Next, you can jump online to the county appraisal district’s website to see what the county values the property as. Wait a minute, you may be saying. Didn’t I just tell you not to trust the various online websites the purport to have the inside info as to the value of your home? Yes, and no. Yes, I wouldn’t trust the websites that are trying to sell you something in addition to providing you the value of your home.
On the other hand, the county appraisal district is almost always in a position where it lists your value as being rather conservative- not too high, not too low. These folks go around and review data for the area and in my opinion, will have a more accurate estimate than the for-profit websites.
Lastly, you can hire a real estate agent to conduct an appraisal. Spending a few hundred bucks in this instance can make a lot of sense for you- especially if that cost can be split between you and your spouse. The agent will look in your area and see what other, similar properties have sold for and can then provide you with an estimate that you can use in your divorce case. Commonly, your home will be compared to three other homes in the area that are similar in terms of their age, several bedrooms/bathrooms as well as their lot size.
Will the value of your home be decreased due to “other” costs associated with the sale of the home?
Closing costs, realtor fees, and other miscellaneous costs are a part of the process of selling your home. However, the question that many clients ask is will these costs be taken into account when determining the value of your home? Will the value of the house be decreased by the amount that these costs total?
The answer is that in my experience they will usually not be reduced. The value of the house is determined by assessing its fair market value. Closing costs and realtor fees are not something that you can necessarily predict in advance with any degree of certainty. One of the most important reasons why is that you cannot be sure exactly when your house will sell. For that matter, you don’t even know how long your divorce will take. Trying to predict accurately when your home will be sold is anyone’s guess.
What about reimbursement claims and your family home?
Reimbursement claims are sort of misunderstood in the family law community. Either that or they are not understood at all. Even if your attorney understands what a reimbursement claim is, can describe to you what they mean and you would like to pursue one, they can be extremely difficult to attach a value to. The other tricky part of a reimbursement claim is that it is up to your judge whether or not to allow a reimbursement claim.
There are two common scenarios in which a reimbursement claim makes sense to pursue in conjunction with your divorce. The first is if you own a separate property home on which community property funds were used to pay down the mortgage. Your spouse may be entitled to a portion of any shared money that was used to pay the mortgage. Your spouse would need to be able to show how much the principal on the mortgage was paid down during the marriage to prove a reimbursement claim.
Evidence to prove a reimbursement claim
To prove a reimbursement claim, the type of which we describe above, you would need mortgage statements that can be offered and admitted into evidence. Tax returns can be helpful as well if you need to be able to show a specific amount of mortgage interest paid each year. You can use the interest paid as a method to find the principal paid (original principal minus the current principal minus the interest paid will result in the amount of total principal paid during the marriage).
Improving the value of a property during the marriage results in reimbursement claims
You could also have contributed income towards things that have helped to increase the value of the property in question. How much of the value of the house has increased because of the improvement would be the main way to determine how much reimbursement you or your spouse would be entitled to in the divorce. The difficult part will be proving that by installing a new roof, the property in question increased a certain amount in value. There is little question that a new roof or an additional room has added to the value of the house- to one extent or another. It is a different thing altogether when you talk about a specific value that can be used in a divorce case.
Dividing the house in a Texas divorce
Here is probably the most straightforward question that we will ask in conjunction with this blog post- how your house can be divided in your divorce. How many different ways are there to divide it and what are the circumstances that may lead to those methods being implemented.
A judge has multiple ways that he can go if your house is at issue in a family law trial. First, a family home can be the separate property of either you or your spouse. If either of you owned it before getting married, or it was inherited by you during the marriage then it could be classified as separate property belonging to one of you. The law in Texas is that a judge cannot cause you to lose your property interest in any separate property that you own.
Either as a result of the property being classified as separate property or not, the house can be awarded to either you or your spouse as part of the divorce. There are always a lot of details associated with this but you need to know that it is entirely possible that either you or your spouse could walk out of your divorce with an ownership interest in the house. Failing to make a mortgage payment on time could result in your spouse coming back into the picture, but otherwise, the property could be yours free and clear after the divorce.
The method of dealing with ownership in the house that attorneys like the best are the selling of the house. This is the easiest and most straightforward method. You do not have to worry about making house payments after the divorce. You do not have to worry about what to do if you have to foreclose on your spouse for failing to make payments on a mortgage which still bears your name after a divorce. All that has to be done is decide what portion of the equity each spouse is entitled to and then put it up on the market.
An uncomfortable result of your divorce trial could be that you are awarded the home, but your spouse is awarded the ability to remain in the house for a specific period after the divorce. It is like you are given the keys to a car, but the prior owner just gets to sit in the backseat for a few weeks and ride around with you. I think most people would not be too happy should this be the result of their case, but it is nonetheless a possibility.
The other option that I am aware of is to order that one spouse be able to retain an ownership interest in the home after the divorce concludes while the other gets a judgment in their favor. This money judgment reflects the amount of equity that is their portion in the home. If you get this kind of award then your spouse would be ordered to pay you within a few months or run the risk of having you sue him or her to collect on that part of your divorce decree.
You would be able to knock your spouse's name off the deed to the home by having him or she executes a special warranty deed in your favor. By the same token, you would sign over a deed of trust to secure assumption to your ex-spouse. This allows him or her to foreclose upon you if you stop paying the mortgage for any reason. Both of you would cover your bases by doing each of these things. Keep in mind that this step is essential no matter which spouse keeps the home. You do not want the liability of having your name on a mortgage you are no longer responsible for. This happens a great deal of your spouse cannot refinance the loan because he or she cannot meet the credit score or income requirements to do so.
The ins and outs of mortgages associated with homes in a Texas divorce-tomorrow’s blog post topic
We have not even begun to scratch the surface about homes and divorces. For instance- we haven't shared with you any information related to the home mortgage. Suppose your spouse cannot refinance the home loan after your case is through. Your name would remain on the original mortgage and that lender would look to you if a few payments are missed. What would you do to protect yourself and your credit? Stay tuned tomorrow to find out more.
In the meantime, if you have any questions about the material that we shared in today’s blog post please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week here in our office. We can answer your questions and address your concerns in a comfortable, pressure-free environment.
Our attorneys represent clients in all of the family courts of southeast Texas. Our goals are simple for your case: to represent you and your interests to the best of our abilities and to maximize your position and that of your family about your divorce or child custody matter.