How To Buy Out House In Divorce: NY Guide To Buying Out Spouse’s Property
One of the most significant issues in a divorce is that of property division. And because couples often accumulate more assets the longer their marriage lasts, this is particularly the case when spouses divorce after 20, 30, or even 40 years together.
In a community property state like California, assets are divided equally between spouses, which can simplify the process. However, in equitable distribution states like New York, the division is based on various factors, making the calculation of home buyouts more complex.
A popular resolution to the issue of allocating possessions is for one spouse to buy out the other’s shares in their co-owned property. Many people choose to do this when one spouse wants to keep an asset and would rather not sell it to split the proceeds. Here’s what to know and how an experienced Long Island, NY divorce attorney can help.
Understanding the Divorce House Buyout Process
A divorce house buyout is a complex process that involves one spouse buying out the other’s share of the marital home. This process can be emotionally charged and requires careful planning to ensure a fair and amicable agreement. The buying spouse pays the other spouse the value of their share of the home’s equity, and the buying spouse becomes the official owner of the property. Funding a divorce house buyout can be achieved through various means, such as refinancing the mortgage, taking out a home equity loan, or using cash savings. Each method has its own set of advantages and considerations, so it’s important to choose the one that best fits your financial situation.
Determining the Home’s Value and Equity
Determining the home’s value and equity is a crucial step in the divorce house buyout process. The home’s value can be determined by getting an appraisal from a professional appraiser or by looking at comparable sales of similar properties in the same area. The outstanding mortgage balance is the amount that still needs to be paid off to the lender. Equity is the difference between the home’s current value and the amount still owed on the mortgage. The equity ownership share will depend on the state’s laws regarding property division in a divorce. In community property states, each spouse has a 50% ownership share, while in equitable distribution states, the court will divide the property fairly and equitably based on various factors.
Offer Your Spouse a Direct Payment
If you have the means to offer your spouse a lump sum payment for their portion of an asset, like a house or car, this is probably the easiest way to settle the matter. Financial contributions and agreements made during divorce proceedings can significantly impact the final buyout price.
You can also take out a loan for the amount, so you can purchase your spouse’s half of the property outright and pay back your lender over time. This allows you to sever ties completely with your spouse at the time of your divorce, even if you can’t come up with all of the money you would need to make the purchase.
Offer Your Spouse Something in Exchange
Another way to buy your spouse’s share of an asset is to offer them something of equal value in return. This equitable exchange is common in New York divorces, but it does require you to have the ability to communicate with your spouse to iron out the details of the trade.
For example, if you really want the house in your divorce, but your spouse would rather have your vehicles and boat, you could call it an even exchange so long as you both agree to it. Keep in mind that the trade has to be fair on both sides – courts give some leeway to items with great personal significance, but what you offer your spouse can’t be grossly under the value of what you want in return.
The division of marital assets, including the family home, varies between community property and equitable distribution states, impacting the buyout process and potential trade-offs involving other marital properties and investments.
Refinance Your Existing Mortgage
If the property you want is a home, you may be able to refinance your mortgage under your name only to purchase your ex’s shares. However, addressing the existing mortgage can be challenging when trying to secure financing to buy out a spouse. Whether or not you can do this depends on several factors though, like how much equity you personally have in the property and what your credit score looks like. If you haven’t built enough equity or can’t get approved for a loan, this is unlikely to be a good option for you.
But if you do have good credit and income, and you can get refinanced, you can pay your spouse for their half of the house and own the property yourself. The mortgage will be yours after that and you’ll only have to deal with your lender going forward.
Create a Divorce House Buyout Agreement
If you don’t have the money to make a direct offer for your spouse’s shares in the property, and if refinancing through a traditional lender isn’t an option, you may be able to create a buyout agreement where you make payments to your spouse over time until you’ve purchased all of their holdings. A divorce settlement is crucial in reaching an agreement on significant assets, including the marital home. Usually, this requires you to be on reasonably good terms, since communication and trust are key to making an arrangement like this work.
Legal and Tax Implications
A divorce house buyout has significant legal and tax implications. The transfer of property rights and necessary changes to legal documentation must be handled carefully to avoid future disputes. A quitclaim deed or warranty deed may be used to facilitate the transfer of interest in the property. The buying spouse may need to refinance the mortgage to release the other spouse from their financial obligations under the loan. However, if the buyout is structured in a way that does not meet specific legal requirements, the IRS may view it as a sale, potentially triggering capital gains tax. It is essential to consult with a divorce attorney and tax professional to ensure a smooth and tax-efficient process.
Property Appraisal and Valuation
A property appraisal is a critical step in determining the value of the marital home. A professional appraiser will assess the home’s value based on factors such as comparable sales, the home’s condition, and current market trends. The appraisal will provide an unbiased market value, which will be used to determine the home’s fair market value. It is essential to choose a qualified appraiser and to understand the appraisal process to ensure an accurate valuation. The appraisal will also help to determine the equity in the home, which will be used to calculate the buyout amount.
Determining the value of a property is a crucial step in various financial negotiations. In the context of a home buyout during divorce proceedings, accurately determining the home’s value is essential for fair financial negotiations between spouses. This process ensures that both parties have a clear understanding of the home’s worth, which is vital for reaching a fair agreement.
When To Get in Touch with a Qualified NY Divorce Lawyer
If you are considering a divorce or your spouse has announced to you their intent to divorce, you should consult with an experienced divorce and family law attorney right away. A marital settlement agreement is crucial in ensuring a fair division of assets, including the division of marital assets and responsibilities. The outcome of your case, including what property you get and whether or not you have custody and visitation of your kids, often depends on how quickly you act and how skilled your legal representation is.
In most situations, the more experienced your attorney, the better your case results are, so it’s important that you work with someone who has what it takes. At Hornberger Verbitsky, P.C., we have the experience and dedication to help you navigate the difficult issues of dividing property during a divorce and will advocate for realistic solutions for you and your family.
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About the Author
Robert E. Hornberger, Esq., Founding Partner, Hornberger Verbitsky, P.C.
- Over 20 years practicing matrimonial law
- Over 1,000 cases successfully resolved
- Founder and Partner of Hornberger Verbitsky, P.C.
- Experienced and compassionate Long Island Divorce Attorney, Family Law Attorney, and Divorce Mediator
- Licensed to practice law in the State of New York
- New York State Bar Association member
- Nassau County Bar Association member
- Suffolk County Bar Association member
- “Super Lawyer” Metro Rising Star
- Nominated Best of Long Island Divorce Attorney four consecutive years
- Alternative Dispute Resolution Committee Contributor
- Collaborative Law Association of New York – Former Director
- Martindale Hubbell Distinguished Designation
- America’s Most Honored Professionals – Top 5%
- Lead Counsel Rated – Divorce Law
- American Institute of Family Law Attorneys 10 Best
- International Academy of Collaborative Professionals
- Graduate of Hofstra University School of Law
- Double Bachelor’s degrees in Philosophy, Politics & Law and History from SUNY Binghamton University
