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How to divide the value of a house in a California divorce

On Behalf of | Dec 8, 2017 | Firm News, Property Division

For most divorcing California couples, their house is their biggest asset, and the mortgage is likely to be the largest debt. California’s community property law does not give couples much latitude in how to divide the equity in the house, but several property division options are nevertheless available.

Each party should hire an appraiser to value the house. Having two appraisals will help ensure that both parties are fully informed about the value of the house. The net value of the house can be easily determined by subtracting the amount of all mortgage loans from the appraised value; the remainder is the net equity. If the house was purchased while the couple was married, California’s community property law dictates that each party has an equal share in the net equity. Another important preliminary decision is whether market conditions make it wise to sell the house immediately or wait until those conditions improve.

The first option to be considered is probably the simplest: sell the house, pay the mortgage balance and split the proceeds. The advantage of this strategy is that it helps the couple separate both emotionally and financially. A second option is the re-financing of the house by one spouse to provide enough cash to buy out the other spouse’s equity interest and to pay off the existing mortgage. An interim tactic is to keep the home temporarily, with the spouse who occupies the home paying rent to the other. The amount of rent must take into account the house’s operating expenses, real estate taxes. In this scenario, the spouses agree to a trigger date or event which requires the sale of the house. This choice is premised on the assumption that the spouse who will keep the house has enough income to make the mortgage and real estate tax payments.

Each of these schemes has variations and can be altered to fit the needs of different couples. An experienced family lawyer can be vary helpful in exploring and understanding the various options.

Source: Huffington Post, “How to Split Home Value in a Divorce,” Holden Lewis, Nov. 28, 2017