What is a house 'buyout' during divorce?

When a couple divorces, the property is divided up according to the guidelines in that state. New York's equitable distribution law divides property fairly, depending on whether it is marital property (bought during the marriage), or separate property (owned before or somehow acquired separate from the marriage such as through an inheritance). If the house is separate property, it will belong to the owner after the divorce.

If the house was bought during the marriage, as most houses are, it will be divided between the couple. The problem is that a house can't be split down the middle, and divorcing couples rarely desire to continue living together. The house can be sold during the divorce and any money left over split between the parties.

But, what if one party wants to stay in the house? It might be for simple convenience or for an important reason like keeping the children at the same school and not forcing them to move at an already traumatic time. In this case, one spouse can buy the other's interest in the house.

How the court decides a fair price for the buyout

The first most important step in a buyout situation is establishing a fair price for the house. The best way to do this is through an official real estate appraiser. The spouse staying in the house will probably refinance so only his or her name will be on the mortgage, and an appraisal is needed for this anyway.

There are other costs that the court can factor in when deciding a fair price during the divorce settlement. When refinancing, there will be potential broker's fees, closing costs and other fees associated with getting a new mortgage. The house may need repairs or be behind on taxes.

Various other aspects of the divorce settlement may come into play. The buying partner might pay a larger share if the furniture is staying in the home, or the couple may negotiate a different price in exchange for spousal support. The agreement on the house can reflect money owed by one partner in another area, when other assets or liabilities are split up.

The final say

Divorcing spouses who are considering splitting a marital property through a buyout should defer to the experts. It may seem simple if there is only a $50,000 mortgage left to split the number down the middle, but there are many other factors to consider. A divorce is already a stressful time, but a successful house buyout can help keep continuity in the lives of those who stay and allow the departing spouse to move forward.

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