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What should couples know about
selling the house during a divorce?
By Brett Engel
July 7, 2003, The Oregonian |
| Q: |
We are getting divorced. How should we decide whether one of
us should keep the house or whether we should sell it? |
| A: |
Many factors should be considered. If you have children, the
custodial parent may want to keep the home so the children can live there.
Generally, the court will agree that the children should remain in the family
home unless finances make it unworkable.
Quite often, when parties divorce there is an inevitable drop in the standard
of living because two households must be supported instead of one. The amount
of joint debt you have accumulated and a parent's other financial obligations
are factors the court would consider.
You should also consider whether the award of the house fits in with the overall
property division. In Oregon, the court divides property in a manner that is "just
and equitable." In most cases, this means the net value of your marital
estate will be divided equally.
The equity in your home can often be one of your most valuable assets. The "equity" is
the fair market value of the home, less the outstanding mortgage balance. If
you have other assets that offset or exceed the equity in your home, it may
be possible to award the home equity to one spouse and other assets with similar
value to the other spouse.
If you and your spouse do not own sufficient assets to offset the equity in
the home, it may still be possible for one of you to receive the home. In many
cases, one spouse receives the home subject to a money judgment in favor of
the other spouse to equalize the asset division. The court would require you
to pay your spouse his or her equalizing judgment within a certain period of
time. If you have enough equity in your home, it might be possible to refinance
your home and use some of the equity to pay all or a portion of the judgment. |
| Q: |
If the home isn't sold until later, how do we determine the house's
value during the divorce proceedings? |
| A: |
In most cases, the court will value your home as of the date
your case goes to trial, and in some cases, the date you separated.
Many couples settle their cases without going to trial, however, and are able
to agree to the value of the home. If you purchased your home recently, you
and your spouse might agree to a value that is similar to the purchase price.
You could also consult with a Realtor and obtain a comparative market analysis
on your home. Many couples refer to their yearly tax statements to approximate
the value of the home, though this approach is not always accurate. If you
and your spouse are in agreement, the court will usually accept that value.
If you and your spouse are unable to agree on the value of the home, you should
hire a professional real estate appraiser to obtain the most accurate estimate
of your home's value. A professional appraisal will usually cost less than
$500. Your appraiser will charge extra if he or she is required to testify
in court on your behalf |
| Q: |
How does the value affect the debt/asset ratio? |
| A: |
If one spouse will receive the house, the equity will be considered
in the asset/debt calculation. Under Oregon law, you cannot deduct the estimated
costs of sale from the home's value unless you plan to sell the home in the
very near future.
If neither spouse wants the home, the court will order the house sold and will
provide for the payment of the underlying debts and costs of sale. If money
remains after the sale of the house, the court can divide it in a manner that
is "just and equitable."
Sometimes the outstanding debts and costs of sale exceed the fair market value
of the home. In this case, it may not be wise to sell the house at the current
time because you will be required to bring money to the real estate closing
to pay the underlying debts and costs of sale. One of you may want to receive
and live in the house and hope the value of the house appreciates. |
| Q: |
What should I know about the mechanics and timing of the home
sale? |
| A: |
Under current Oregon law, unless you and your spouse agree, the
court cannot order your house sold until the divorce is final. If you and your
spouse agree, however, you can list and sell the house while the case is pending.
If the house is titled jointly, both of you will be required to sign a deed
to transfer title to the new buyer. If only your spouse's name is on the title,
you may want to file a notice of "lis pendens" to put potential purchasers
on notice that a divorce is pending.
If you have agreed to sell the house while the case is pending, it is a good
idea to reach agreement with your spouse on the selection of a Realtor, the
listing price, necessary repairs, periodic adjustments to the listing price
(if needed) and the distribution of the proceeds. Any information placed in
a court document is a public record, so your agreement regarding the minimum
sales price you will accept should not be included in those documents.
If the court orders your house sold after the divorce is final, the court can
place conditions on the sale, such as the price, the selection of a Realtor
and automatic reductions to the listing price.
Although the court cannot order your house sold while the case is pending,
the court can award either party temporary use of the house and can order either
party to make the mortgage, tax, insurance and utility payments while the case
is pending. |
| Q: |
What documents need to be changed to reflect the change in ownership? |
| A: |
In Oregon, a Bargain and Sale Deed or a Quit Claim Deed may
be used to transfer property received in a divorce. Your divorce attorney can
prepare this document. Many times, the title company can prepare this at no
additional charge when you refinance the home.
If your ex-spouse refuses to sign a deed to transfer the home, you should consider
recording the divorce decree to complete the legal transfer of the property.
Brett Engel is an attorney and specializes in family law with the Portland
law firm of Stahancyk, Gearing, Rackner & Kent. He can be reached at 503-222-9115. |
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