Oftentimes the marital residence is one of the most valuable assets owned by a married couple. It also is one of the assets to which many people become emotionally attached. So what happens with the marital residence when a married couple is heading for divorce? What are the available options?
The first question must necessarily be what is the value of the marital residence? To determine the value, some parties rely on information available on online websites such as Zillow.com or Redfin.com. However, these online websites are often unreliable and do not constitute admissible evidence regarding the value of the residence if the matter were to proceed to Court. A more practical and reliable approach is for the parties to retain a certified residential appraiser to prepare an appraisal report. Couples can either choose to jointly retain an appraiser or one spouse can obtain an appraisal and if the other spouse disagrees with the appraised value, he or she can then obtain another independent appraisal report.
Once the parties can agree on the fair market value of the residence the next step is to determine if there are any mortgages or encumbrances against the residence. If so, these debts will be deducted from the appraised value of the residence to determine the equity in the home. Once the equity is determined, then discussions regarding the division of the residence can begin. (For example, if the residence is appraised at $300,000 and there exists a $100,000 first mortgage, the equity in the residence is $200,000).
There are four (4) options available regarding the disposition of the marital residence in a divorce. Those options are as follows:
- Spouse A is awarded the residence. Spouse A would buy-out Spouse B’s equity interest in the residence by paying to Spouse B an amount equal to one-half the equity. Typically, Spouse A would have a certain period of time to refinance or extinguish the existing debts to remove Spouse B from the existing liabilities;
- Spouse B is awarded the residence. Spouse B would buy-out Spouse A’s equity interest in the residence by paying to Spouse A an amount equal to one-half the equity. Typically, Spouse B would have a certain period of time to refinance or extinguish the existing debts to remove Spouse A from the existing liabilities;
- The residence is listed for sale with a mutually agreed upon realtor with the parties to equally divide the net sale proceeds; OR
- The parties can continue to jointly own the residence for a certain period of time. With this option there would need to be clear orders as to which spouse can continue to reside in the residence, when the residence would be sold, and how costs for maintaining the residence would be divided.
With the possibility of disputes regarding the assigned fair market value of the residence and disagreements regarding how the expenses for the residence are to be paid before the property is either awarded to one spouse or sold, it is very important for a divorcing spouse to fully understand his/her rights relating to the marital residence to make an informed decision on how best to proceed.
About the Author
Dana Levy (Member, Phoenix) is a certified family law specialist by the State Bar of Arizona. Her practice is concentrated in family law, including dissolution, post-dissolution, paternity, child custody and child support matters. She is a fellow of the American Academy of Matrimonial Lawyers. Please contact Ms. Levy in our Phoenix office at 602-285-5082 and visit her bio here.