Q: Marsha, I am going through a divorce from my husband of 20 years. We have a wonderful house and three children under 18. Is it inevitable that I’ll lose my home?
A: I’m sorry that you are going through this. I know this is a hard time for all involved. In my experience, when a couple divorces, most roads lead to a house sale. Why is that?
California is a community property state. Assets acquired while married are owned equally by each party and split 50/50. These are the three options the divorce court will generally consider:
- One spouse keeps the home and buys out the other.
- Both spouses agree to sell the home and divide the proceeds.
- One spouse remains temporarily, until, for example, the children finish school. Later, the home will be sold. This is called “nesting.”
The three options sound uncomplicated, but divorce is never easy. It is fraught with emotions and rarely simple.
If one spouse decides to buy out the other, then a reliable and accurate appraisal is vital. The spouse keeping the house needs to refinance and may have to pull equity out of the home to buy out the existing partner. The original mortgage will be paid off, and the purchasing spouse takes on a new, larger debt.
The good news is that public policy tends to make interspousal transfers easy. The government doesn’t add an additional layer of grief by reassessing the property value of the house. The purchasing spouse will retain their original tax base. The bad news is that the purchasing spouse has to qualify for the new loan on their own. The court will closely examine the financial condition of the purchasing spouse and consider if the refinance is a reasonable burden. Many times, it just isn’t possible. Without two salaries, the remaining spouse may not qualify for the new, larger loan.
Another option is the “nesting concept.” This sounds reasonable, especially if children are involved. The court wants the children’s lives to remain as smooth and normal as possible. The parents are divorcing, but the children shouldn’t suffer unduly for that. Nesting can come in many forms. The idea is one spouse will remain until the children are grown and then the home will be sold. They can also alternate staying at the home.
What sounds good on paper can often be disastrous when played out in actual life. In one nesting example, a couple rented an apartment close to the family house. One spouse was to live with the children for two weeks while the other one stayed at the apartment. The plan was to alternate the stays until the children were grown and the home could be sold. This plan lasted about two months, until the ex-wife went for her stay at the apartment and found items belonging to the new girlfriend in her chest of drawers. Their community property home was soon put on the market and sold.
If you want to stay in your home, your best option is to buy your ex-husband out, if you are financially able to do that. Or, if you have an amicable relationship, you can try to work out a nesting arrangement until your kids are grown. In my experience, these options are more challenging than they sound, so prepare yourself for the possibility of a sale.
Marsha Gray has worked in Santa Barbara real estate for more than 25 years. She has expanded her knowledge into all aspects of the real estate market. At Sun Coast Real Estate, she serves her clients’ real estate and finance needs. To read more of Marsha’s Q&A articles, visit marshagraysbhomes.com. Contact Marsha at (805) 252-7093 or marshagraysb@gmail.com. DRE# 012102130; NMLS #1982164.
