Your largest investment. Your largest asset. Where your children grew up. Where memories have been made. The site of marital problems. Where you and your children sleep at night. Your family house is all of these things and more. Your home is not only valuable to you from a financial perspective but it is valuable from an emotional perspective as well. This is what makes it such a difficult topic to negotiate on for many people who are going through a divorce.
See, it is easy for an attorney to tell you to think about your divorce like a business transaction. Simply separate your emotions from your family home and you’ll be good to go, right? Easier said than done.
The truth is that if you don’t feel some sort of sentimental or emotional attachment to your home there is likely something wrong with you. Those emotions don’t necessarily have to be positive ones, either. Let’s not forget that you are getting a divorce for a reason. The fights, anger, bitterness and other issues that led to your divorce likely occurred in that home, as well.
However, just because it is difficult separate your emotions from the decision on what to do with your house does not mean that you should not attempt to do so. The fact is that you cannot and should not lead with your heart when it comes to determining what to do with your family home in your divorce. It is too valuable an asset and the impact of this decision can determine the course of your life for years to come.
In today’s blog post from the Law Office of Bryan Fagan, I would like to spend some time discussing with you what options you have when it comes to deciding how to proceed with your family house during a Texas divorce. You will have a number of options available to you but you need to consider your specific circumstances before you can comfortably make a decision on how to proceed in your divorce case.
Don’t put the house on a pedestal
There are certain parts of a divorce that just seem to be more important than other. The family home is one of those parts. People in a divorce will fight tooth and nail to be named the party who has the right to determine the primary residence of their children. I’m not trying to argue that this is not something worth fighting for or that it is unimportant. On the contrary, I spent the entire first part of today’s blog post arguing just the opposite- that your family home is a hugely important asset and part of your divorce.
However, this does not mean that you should treat your family home as a prize to be won at all costs in the divorce. Being named as the party who retains possession of the house after the divorce can have significant drawbacks as well. Nothing in a divorce comes without any cost and there are certainly costs (literally) to retaining the family home.
For instance, you need to consider that your income is going to shrink as a result of the divorce. Whether it felt like it or not, Texas considers income earned in a marriage to be owned by the community. This means that any income that you earn from a place of employment is put into an imaginary pot and split up between you and your spouse. So, even if you never saw your spouse’s income after he earned it, or vice versa, that income is as much yours as it is your spouse’s.
This is important because that income went towards paying the mortgage on your home. Having two incomes go towards a mortgage is a lot more of an attractive position to be in that having one. If you have not been working at all in the past few years you will likely need to find a job immediately after the divorce. Even if you are being paid spousal maintenance (available, for the most part, to spouses who have been married for at least ten years) that income will likely last only as long as it takes you to find employment.
Another issue to consider is that you may be thinking only of what your children need. The key here is “think.” What your kids actually need and what you think they need are likely to be two different things. Your kids need less than you think to get by. Sacrificing your financial stability in order to provide your kids a false sense of security by remaining in the family home is not a good idea. The fact is that you are placing your children in danger by staying in a home that you cannot afford.
Ask yourself this before pushing too hard for the family home in your divorce
Here is a good test to determine if you actually want to stay in that home. Forget the fact that you actually own this house currently. Assume everything else is the same (divorce, family size, income, location of home, etc.). Now, if you had your share of the equity in the home (say, $50,000 for example) would you put that amount of money down on that house and purchase it right now? That is the question you need to ask yourself.
Determine if you are going to “buy” your house again. The reality of the situation is that your divorce offers you a legitimate chance to cash out your equity in the house and go start over somewhere else. I will assume that if you are in a position to make a decision on the house that you are going to be named as the primary conservator of your children. With all of this in mind would you stay or would you go? If would not buy the house again using the same amount of equity that your spouse is getting out of the divorce, then I cannot recommend that you push to keep the house.
Don’t stay in the family house: sell it
If you and your spouse choose to sell the house, this will offer you a clean separation from your past life and can possibly set you up for the near future from a financial perspective. I understand that in many ways your family house is an investment. It can be if you are in a solid position financially and in relation to your family.
However, your house becomes a place to sleep, a place to cook meals and a liability in other ways when you are not in a stable financial position.
Your house will not appreciate in value like a mutual fund will. Your house requires upkeep, taxes, insurance and a great amount of effort to maintain in many cases. The mortgage will need to be paid regardless of what is going on in your family life. These folks do not take any sympathy on you just because you have gone through a divorce.
If you choose to sell the house, you and your spouse can split the equity remaining based on whatever percentages you choose. That percentage will be based on your particular circumstances and those of your spouse. You can use that money to perform an analysis for your family to determine where you need to be (price wise, location wise, etc.) and select a new house to purchase. Or, you may even want to rent a house or apartment and take some time to unwind from the divorce and reassess your situation after that for a short period of time.
You and your spouse can negotiate to decide how repairs and small things will be paid for to get the house ready for sale. Selecting a realtor, deciding on a sale price and other decisions that go into selling the house will also need to be agreed upon. While it will take some effort to sell the house, it can offer you some distinct advantages from a “cleanliness” perspective that cannot be matched elsewhere.
You can remain in the house (or your spouse can)
Another option that you can choose from is to stay in the family house after the divorce. Your spouse can choose this option, as well. A lot of the decision that goes into whether or not to stay will depend on your specific circumstances. If you have kids, the parent who has possession of the kids during the school-weeks may want to stay in the house to maintain some degree of consistency as far as where the kids go to school.
However, if you and your spouse do not have kids then you may not put as much worth into staying in the family house. At that point you would have to make a decision about what is best for you and your family from a financial position. There are a number of different perspectives worth looking at when deciding whether or not to remain in the house. Here are a couple of them for you to consider.
First, you should understand that if you choose to stay in the house, you will need to buy your spouse out of their share of the equity. You are buying their half of the house by paying them whatever that half is worth (minus their share of the mortgage). You should get the house appraised by a licensed and experienced appraiser. Do not settle for a Zillow, HAR or other online assessment of the value of your home. A comparative analysis of a couple similar homes in your area and your home should do the trick.
Next, have the home inspected for problems or latent issues that require repair or replacement. You can negotiate on those repairs and see to it that adjustments are made to the value of the home based on those repairs. Now you are in a solid position to know what their share of the equity is in the home.
The next step would be to discuss with your attorneys the steps associated with removing your spouse’s name off the deed to your home. By the same token, your spouse will want some reassurance that he or she can hold you accountable for missed mortgage payments. A deed of trust to secure assumption would allow your spouse to foreclose upon you in the event that you fall behind in paying the mortgage. Keep in mind that it is not a given that you will be able to have your spouse’s name removed from the loan via a refinance. If you do not qualify for one then this option is a good one for your spouse to limit their liability.
I would recommend that you speak to different lenders in advance to gauge whether or not you will qualify for a refinance. It makes little sense to wait until your divorce is over to do so. That forces the attorneys to insert contingent language into the decree such as, “in the event that person X qualify for a refinance of the mortgage, then the following will occur…”. I prefer that everyone know what is going to happen before the divorce ends.
Keep the house for now- but sell it later
The final option that can be chosen in a divorce would be for you or your spouse to retain the house for now but to sell it later on. I will begin tomorrow’s blog post with information about doing just that. In the meantime, if you have any questions about the material that we covered 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. These consultations allow you to ask questions and receive direct feedback from our attorneys about your specific circumstances.
It is a privilege to serve the people in our community in family courts across southeast Texas. We welcome the opportunity to do the same for you and your family.