The courts can order you to sell your house if:
- One spouse does not have enough money to buy out the other spouse’s share in the property.
- Both spouses are not in agreement about the property’s market value. In such a case, the only way out for the courts is to order the couple to sell the house at the market price and split the sale proceeds in the ratio awarded by the courts.
- The case is a high-conflict one and neither spouse agrees with the other spouse’s demands or requests.
In a divorce, property division is based on state laws. States follow either the community property distribution rule or the equitable property distribution rule. Usually, the property is distributed on a 50/50 basis.
A house purchased during the marriage by either spouse or both the spouses may form a substantial part of the marital property, and there may be disagreements about its distribution. Some spouses may disagree on the property valuation, some spouses may not have sufficient liquidity to buy out the other spouse’s share in the property, while some spouses may allow the other spouse to stay in the house while agreeing to sell it at a later date, and so on – it all depends on the circumstances of the case and the relationship between the divorcing spouses.
Here are some alternatives both spouses can consider before the courts order them to sell the house. However, note that these alternatives will work only if both spouses share a cordial relationship and are emotionally mature.
4 Alternatives That Can Avert Your Home Sale
1. Offer Other Valuable Assets
If you don’t have adequate liquidity to buy out the other spouse’s share, or if you don’t want to sell the house now (for whatever reason), you can offer other valuable assets to your spouse that make up his/her share of the property. This alternative will work only if the other spouse agrees to accept this deal.
2. Defer The Sale
Assuming both spouses are friendly and cooperative, you can consider temporarily delaying the sale of the house and enter into an agreement with the other spouse that specifies:
(a) How will mortgage payments be made?
(b) Which parent will occupy the house?
(c) Will the children also stay in the house?
If the other spouse is uncooperative, and if there is no option left with you but to defer the sale (for example, because the children have a year or two to finish their schooling), you can file for a deferred sale order. However, you will have to prove that the deferment is in the best interests of the children and that it does not place any financial hardship on the other spouse or the custodial parent.
Both spouses will continue to co-own the house until it is sold.
3. Refinance The Mortgage
If you do not have adequate funds to buy out and pay the other spouse’s share, you can consider refinancing your mortgage or adding a Home Equity Line of Credit (HELOC) to your existing mortgage to pay off the other spouse.
4. Divide The House
If your house is big enough, and both you and your spouse are calm and friendly towards each other, you can consider dividing the house into 2 separate units instead of selling it or taking any financial burden. This is not a recommended ongoing situation, however, because do people really want to live right next to their ex?
Finally, before signing off, if the courts make you sell your house, don’t forget to consult your accountant to figure out if you qualify for a tax exclusion.