A house buyout is one way for spouses to maintain savings in a separation. Here are 7 tips for negotiating a house buyout during a divorce.
To negotiate a house buyout during divorce, spouses must gather financial information on their house before refinancing the asset. Utilizing legal support is crucial to ensure a legal buyout during a divorce.
What Is a Buyout?
In a divorce, spouses may decide to “buy out” another spouse’s interest in their shared property. Rather than selling or co-owning the property, one spouse may buy out the other spouse’s shares.
Related: Community Property Laws in California
What Are the Advantages of a Buyout?
When children are present in a divorce, a buyout allows for continuity and stability. A buyout can be helpful in unstable market conditions to avoid the selling of property.
Is a Buyout the Only Route to Take?
No, a buyout is not the only route to take. In a divorce, spouses may split up their home in one of three ways. The first is for one spouse to buy out the other’s equity. The second is to refinance the house mortgage and then have one spouse buy out the home. The third is to sell the home and split the proceeds.
Tips to Approach a Buyout During Divorce
Related: How to Divide Property in a California Divorce
1. Determine the Home Value
The first step in a home buyout is determining the home’s value. The easiest way to get an estimate is with a real estate agent who can analyze comparable home rates in the spouses’ neighborhood. Spouses may also hire an appraiser to develop a formal report on home value.
Related: Who Keeps the Marital Home in a California Divorce?
2. Gather Funds
The spouse retaining the home may refinance to buy out the other party. Spouses may assume mortgage payments or use other property as payment.
3. Consider Custody
In a divorce with kids, the parent maintaining custody of children may want to retain the home to provide stability and consistency.
4. Factor in Spousal Support
Spouses may use the buyout price to reduce the spousal support the remaining owner receives. Reductions in spousal support may limit the tax advantages for a spouse paying alimony.
5. Refinance the Asset
In order for a spouse to obtain a new mortgage, the home must be refinanced. The buying spouse may take out a loan to pay off the mortgage and complete the buyout.
6. Check for Maintenance
The appraisal of a house may change if the house requires maintenance.
7. Utilize Legal Help
An expert divorce attorney can help with complications such as alimony and house interest.
FAQs About Negotiating a House Buyout During Divorce
Does a house buyout deduce the cost of sale for the house?
Since the house is not being sold during the divorce, a deduction for the cost of future sale may not be granted.
Does a house buyout have to be in cash?
No, a buyout can occur in cash exchange or with the offset of another asset.
What happens if a loan modification is unsuccessful?
If a loan modification is unsuccessful, the house is often sold instead of a buyout.
Can I use online sites like Zillow to appraise my house?
While sites like Zillow can help gain an estimate for a home’s market value, a professional appraiser must consult spouses in a legal buyout.
If I retain the house in a buyout, can I sell it?
Selling often incurs additional fees which can make reselling a family home after a buyout more expensive than selling instead of a buyout. A spouse may sell their assets after divorce.
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If you or a loved one would like to know more about negotiating a house buyout during divorce, get your free consultation with one of our divorce attorneys today!