Many married couples decide to purchase homes where they live together during their marriages. They convert an ongoing financial obligation to pay for housing into a source of equity by paying off a mortgage instead of simply paying rent.
Others may purchase vacation homes, distressed properties in need of repair or even vacant land as investments. Those real estate holdings might slowly appreciate over time and could lead to profit when owners eventually sell them. They could potentially be a source of rental income. They can also pose numerous practical challenges during divorce proceedings.
Disagreements about valuation
Given that real property can be worth quite a bit, couples may have strong feelings about what they should receive for their interest in a particular property. Some people egregiously overestimate the value of real estate because they want as much equity from their spouses as possible. Others look at unrealistically low valuations, such as the price paid for the property years ago, to justify a low value set for the property. Spouses either need to agree about the fair market value for the property or get support from real estate professionals to determine what the property is worth.
Who stays at the property
Particularly when the real estate in question is the primary residence occupied by the spouses, there may be disagreements about who should stay at the property after the divorce. Disputes about possession are common, in part because people worry that giving up access to the property might forfeit their financial interest in the real estate. Couples may find it difficult to agree on who should stay in the home after the divorce.
How to share equity
There are many different solutions for dividing home equity between two spouses in divorce proceedings. Refinancing to withdraw equity is a viable solution in some cases. Other times, one spouse could potentially give up their interest in other marital resources to balance out their retention of the marital home. Given that there are so many different assets and debts contributing to the marital estate, it may be difficult for the spouses to amicably agree on exactly how they should offset one spouse’s home equity with other marital resources.
Those who understand the potential property division challenges that could arise when they share real property with a spouse may use that information to more effectively prepare for negotiations. Seeking legal guidance is a good way to get started.