Going through a breakup or divorce comes with a lot of stress emotionally, physically, and financially. It often leaves the couple with a lot of questions, especially if they lived together beforehand. One of the most pressing questions is: What happens to your real estate during a couple break up?
Whether you’re married or not, it’s important to know the standing of your real estate when going through a breakup. Here’s everything you need to know.
Many unmarried couples decide to buy property together.
When doing this, it’s likely the piece of property is jointly purchased. That means there are two names on the loan or mortgage, signifying that both parties hold ownership over the home. If this is the case, it’s likely there could be some arguments over who actually gets the property.
The first thing you have to consider is how you signed the loan. There are typically two ways you can do this.
Some couples will buy a home as tenants-in-common. This method gives each tenant a certain agreed-upon percentage of the home. For example, one half of the couple may own 40% of the home, whereas the other one owns 60%.
In this case, the home might go to the person who owns the majority of the property. The minority party will have to pay off their half of the loan. We’ll go into this more in a bit.
Property can also be purchased as joint tenants. This means the property is owned equally — 50/50 — between the two parties. This can make things a little bit messier when it comes to a couple break up.
There’s no easy or straight-forward method of splitting real estate after a couple break up. Unless you turn to mediation, you’re going to have to decide who gets the home as a couple. Finances play a key role in determining this.
One party might decide to refinance the loan or mortgage in their name exclusively. In this case, the party taking the home has to have good credit. Doing this absolves the other party of the home entirely.
Another choice is to sell the home jointly to pay off the mortgage or loan. Of course, the home may be worth less than the loan, making this a bad move in some cases.
The riskiest move — especially for your credit score — is to let the bank repossess the property. This gets both parties off the hook, but again, it does major damage to each party’s credit. This should be avoided if possible.
Finally, one party can stay on the loan or mortgage, live in the home, and continue paying it off. They can take the other party’s loan, or have them continue to pay it (although this is unlikely). Either way, both parties will have to remain on the loan on paper, and some parties may not feel comfortable with this if they’re not living in the home.
So, there are a few options for unmarried couples with property, but none of them are easy. What’s more, they each require you as a couple to decide who gets to take on the property. If this can’t be decided, you’re going to have to get a mediator involved.
A mediator will help you decide how the property should be split based on your finances, standing, etc. This is often the best option for couples breaking up, especially if the break up isn’t amicable.
If you’re going through a divorce, it can be even more difficult to determine who gets to keep the property.
The most straight-forward method is for the couple to decide who gets to keep what. If you can do this, you can avoid going to court over the property. However, this may not be viable, especially in a messy divorce.
In this case, the decision is made by the court according to the equitable distribution method. This is a method of splitting maritally owned property, from items to real estate, equally between the two parties. Most states follow this method, except:
When going through the equitable distribution method, you’ll both need to appear before the court. Each party will need to present a number of items to find who is most suitable to take on the home.
The court will have to review a few factors when making its decision. These include:
The court will review all of the above to determine who is best fit to take on the home. They want to give the home to someone who can pay for it and maintain it. The court will want as much information as they can possibly get to help them make their decision.
Another important factor in who gets to take the home is the purchase date. If the home was bought by one party before marriage, there may only be one name on the mortgage. In this case, the home is considered separate property and goes to whoever originally purchased it.
Gifts are also considered the property of the gift recipient. If you were given the house as a gift, it may be yours to live in.
The court won’t always give the home to one party outright, though. Sometimes, they’ll find the home to be marital property, and award both spouses a share in it. What happens then?
If the judge awards both spouses a share of the home, you have a few options to consider. Since you probably won’t be living together, you’re going to need to do something to pay off the home. These options are similar to what might happen when an unmarried couple splits up their home.
One party may buy out the other’s shares in the home, moving all ownership to them. This can be expensive, but it’s probably the most straightforward way to deal with the issue.
In some cases, the court will let one spouse live in the house for a set period of time even when it’s technically owned by both. The couple is given a date by which the house must be sold. By that date, the spouse living in the home must vacate and have the home sold.
The couple may be told to sell their home as fast as possible. Once the home is sold, the money made from the sale is distributed between each party. The court will decide how this is split up.
Finally, the court may offset the home’s value by giving the other partner more marital assets. For example, one party may be given the home, while the other is given a larger portion of other co-owned property. This may include anything from vehicles to furniture and more.
With a deferred distribution, the judge sets a future date by which the home must be sold. The judge might do this if you have kids under 18, or if the housing market is in bad shape. The “sell-by” date may fall in line with when your kid(s) turn 18, or when the housing market picks up.
In this case, both parties will continue to pay taxes, mortgage payments, insurance, and maintenance fees on the home. They must keep the home in good shape until the sell-by date. One party is allowed to live there as determined by the court.
No part of a divorce or couple break up is easy, especially splitting up real estate.
It’s important to stay strong through the process and remember that this is just temporary. There are plenty of ways to split up your real estate with civility and fairness, whether it’s through the court, a mediator, or through your own means.
Consider the factors above and know that the court will determine the fairest way to go forward. It may not feel like it all the time, but it’s important to remember that these decisions are hard for all parties involved, including the court. Be prepared, get your documents in order, and act with civility, and you’ll get through this in one piece.
If you have kids and have recently gone through a split up, see what 2Houses can do for you. It’s a system designed for easy communication between separated couples, including shared calendars, financial graphs, and a messaging system.
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