Every divorce settlement requires the parties to divide their property as part of ending the marriage. One of the most important shared assets is the marital home. Both spouses can have a strong attachment to the house, turning divorces into contentious court battles.
The alternative is to “buyout” the house from your former spouse. It creates an opportunity to resolve the problem instead of battling it out in court. Both parties save money on court fees, and you maintain control of the situation rather than the court.
What Does a House Buyout Mean?
A house buyout is when the buying spouse pays the other spouse the value of the home or their share of the mortgage. By doing this, the buying spouse can become the official owner of the property.
Instead of having to fight over who gets the house, you both agree on the owner of the property as part of a divorce agreement. This provides many different benefits to both parties:
Reduced Friction in the Family
A divorce is a difficult time for you, your former spouse, and your children, if you have any. A home buyout takes one of the most troubling issues out of the divorce. Many spouses can work out a fair deal that benefits them and their children.
Protecting the Children
Divorce can be a traumatic experience for children. Besides potentially witnessing their parents argue over issues, they may also have to move when the court has finalized child custody. They may have to change neighborhoods and schools and make new friends. In other words, they may have to start a new life.
Buying out a spouse in a divorce can help maintain a sense of stability in the children’s lives. The custodial parent can buy out the other parent from their home so the children can stay where they’re already accustomed to, which can be beneficial for their well-being.
Saving Litigation Costs
A divorce can be costly. It usually requires lawyers and extensive negotiation over shared assets, which can lead to heated arguments. Especially when it’s time to answer the question “who gets the house?”.
The cost of litigating this issue can be very costly. Plus, there’s always a possibility that either spouse won’t be happy with the judge’s decision.
The more you can avoid disagreements, the less time and money will be spent during the negotiation process.
This is where a house buyout comes in. Spouses can negotiate ownership of the property at their leisure and with greater control than having it done in court. You’re able to talk things through in a house buyout where both parties can voice their concerns and come to a mutual agreement.
What is the Process for a House Buyout?
A house buyout works best when it follows the right process. You will have to tender an offer by creating a divorce house buyout agreement, and your spouse will have to accept. There are two primary ways a home buyout can occur in the divorce process:
1. Direct Buyout and Refinancing
When you want the house, your first option is to pay your spouse the value of their share in the house. If you both own the house without a mortgage, you will pay the value of your spouse’s share in the house directly to them. You can pay with your own funds or seek financing from a bank. Once you accomplish that, you will officially own the house.
For many couples, the home is still subject to a mortgage. In that case, you will likely have to refinance the home with a new mortgage. This requires you to approach a bank for the mortgage buyout in a divorce. It’s an excellent option if you have good credit and can get approved by a bank for a loan.
This method also allows you to retain other items of property in the equitable division part of your divorce, rather than giving up property to get the house. There may be important assets you want to keep, so direct payment for the house can help achieve this goal.
Your former spouse can execute a quitclaim deed as part of the sale. This legal document is proof that your former spouse has relinquished their rights in the property.
2. Equal Distribution of Other Assets
Another method to agree on a “buyout” of the home is to calculate its value and exchange assets that are equal in the house’s value or the value of the spouse’s share. For example, if the home is valued at $200,000, and you each have equal ownership in the home, your share is worth $100,000. Instead of paying this directly, you could exchange:
- Investments and stocks
- Other valuable property
Exchanging assets saves you the trouble of refinancing, and you can handle this aspect of the divorce or separation agreement without the court getting involved. It will still require the use of a quitclaim deed for your spouse to relinquish their interest in the home.
Both methods require an appraisal of the home’s value to complete the buyout process.
How Do I Get a Property Appraisal for My Divorce?
Most couples will use a real estate appraiser to determine the value of their home. This service comes with a cost — usually in the range of $300 to $500. When the spouses work well together, they can both pick a real estate property appraiser to determine the home’s value. Property appraisers will typically look at certain factors to determine the value of your home, such as:
- Comparable properties in the area (“comps”)
- The age and condition of the home
- The neighborhood
- The home’s exterior (curb appeal)
- Signs of water damage or mold
- Size of the home
- Safety features
- Home improvements and additions
If the home has recently been appraised, you can also just proceed with that figure to save time and money on another appraisal. Once the home’s value has been determined, you have a starting point for negotiations.
Fights Over Property Value
While it’s better if you can agree, not every couple will. In that case, you may need to hire separate appraisers. A less efficient option is to have the court decide the home’s value. The court may look at the parties’ competing values of the home and decide from there.
The court may instead hire an independent appraiser and use the value they give. This is usually a costly option and can lead to either party being unhappy with the numbers.
Who Pays for a Home Appraisal in the Divorce?
A home appraisal is usually paid for in one of several ways:
- The “Purchasing Spouse”: You may agree to pay for the appraisal to help facilitate the agreement. Despite the relatively low cost of an appraisal compared to the buyout value, your spouse may not want to pay for the appraisal. If you agree to pay, they may be more willing to proceed with the process.
- Cost-Sharing: The parties may agree to split the cost of the home appraiser.
- Separate Appraisers: The parties may choose to hire their own appraisers. In this case, each spouse will pay their respective appraiser instead of sharing the cost.
Can I Force a House Buyout?
House buyouts need to be a mutual agreement. You can’t force anyone to accept an offer. If the spouse is adamant they want the house as well, it will take court action to decide who will keep the marital home.
Instead, you can try to negotiate with your spouse by telling them the benefits involved in being bought out. You can also try sweetening your offer.
Another alternative is to consider giving up your interest in the house. If your spouse doesn’t budge, think about an amount you feel is fair to cede your stake in the property. Your spouse may be willing to pay it to keep ownership of the home.
Ultimately, you have to decide what is right for you. A house buyout is one of the easiest ways to avoid litigation and a difficult divorce—when you can make it happen.