How to Navigate Your Divorce Settlement Options in Virginia Related to the House
In the U.S., the average home holds $274,000 in wealth, making it one of the most valuable assets for many couples. So, it’s understandable that when divorcing, couples may face confusion over how to handle their shared home. This can result in financial challenges down the road. “I work with hundreds of homes each year that have been foreclosed due to divorce,” says Tim Ray, a leading agent in Kansas City, Missouri. “Many people simply don’t know how to handle the situation, and that can cause serious financial strain.” Rather than ignoring the reality of what’s likely your largest asset, take the time to carefully consider your options related to your home. Real estate attorneys and family law experts share key insights for navigating these decisions.
1. Work with a Divorce-Savvy Real Estate Agent
Selling a home during a divorce involves unique challenges. A skilled real estate agent can ease this process, helping you make informed decisions. Look for a Certified Divorce Real Estate Expert or a top local agent with experience in divorce-related sales.
2. What Is a Divorce Settlement and How Does Property Fit In?
A divorce settlement is a legal document that defines the terms of a divorce, such as child custody, alimony, and property division. Creating a settlement typically follows a standard process:
File the Complaint – A divorce petition is written and filed.
Serve the Complaint – Your spouse is officially notified and provides their response.
Exchange Information – Both parties disclose financial details.
Mediation and Settlement – Many states require mediation to resolve the division of assets.
Approval or Trial – The judge approves the settlement or the case goes to trial if no agreement is reached.
If you and your spouse share a home, deciding its fate is one of the most significant aspects of your settlement.
3. Options for the House
Divorcing couples typically choose one of the following paths regarding their home:
Sell the Home and Split the Proceeds: This option allows both parties to move forward quickly and equitably.
Buyout: One spouse may decide to stay in the home, purchasing the other's share.
Hold the House for Later Sale: In certain circumstances, you may choose to rent the house out and sell at a later date.
4. Determine the Home’s Value
Before proceeding with any decision, you need an accurate estimate of your home’s value. Whether you’re selling or buying out your spouse, a home appraisal is essential for determining the fair market value, especially in contested situations. If you’re selling, your real estate agent can conduct a comparative market analysis to set the listing price.
5. Financially Assess Keeping the House
It may be tempting to hold onto your family home, but it's crucial to assess whether you can afford the long-term costs. Beyond buying out your spouse’s share and refinancing, you'll be responsible for ongoing maintenance, taxes, and repairs. Be cautious, especially if you're also obligated to pay child or spousal support.
6. If You’re Leaving, Get Your Name Off the Mortgage
Even if you move out, you may remain legally bound to the mortgage. Ensure your ex-spouse refinances the loan to remove your name. Otherwise, you could still be held liable if they default.
7. Navigating Agent Commissions
In a divorce buyout, discussions over agent commissions can become complicated. The buying spouse may attempt to negotiate down the agent's commission, potentially reducing what the other spouse receives. If you plan to sell soon, consider these fees before agreeing to a buyout.
8. Be Mindful of Tax Implications
Selling your home post-divorce can impact your taxes. Married couples can exclude up to $500,000 in capital gains on their home sale, but this benefit may be reduced if you sell after divorce. Understand the conditions necessary for tax exclusions and plan accordingly.
9. Know Your State’s Property Division Laws
State laws heavily influence property division. In community property states (e.g., California, Texas), property acquired during marriage is split equally. In equitable distribution states (e.g., New York, Florida), assets are divided fairly, but not necessarily equally. These laws can determine your portion of the sale or buyout.
10. Consider What’s Best for the Family
Divorce decisions are emotional, and it’s important to think about what’s best for your children. In some cases, couples may agree on a temporary arrangement where the kids stay in the marital home while parents alternate living there. Though unconventional, this can provide stability for the family during the transition.
11. Handling the Contents of the Home
Once you’ve decided what to do with the house, you’ll also need to address the belongings inside. Create an inventory, assign values, and decide who gets what. If you can’t reach an agreement, consider involving a mediator.
12. Explore Creative Solutions
Sometimes, a more creative approach works best. For example, one spouse might give up a portion of their 401(k) in exchange for staying in the home. Divorce settlements don’t always have to follow a traditional model, so feel free to think outside the box for the best solution.
