In Georgia divorces, often the parties’ marital or family home will be the largest estate in the entire marital estate. There are multiple ways to deal with the issue, and here are a few common ways to do so:
Sell the home, and divide the equity. In doing so, however, unless you and your spouse trust each other and can work together, you need to have hard and fast rules on how to sell the house, such as who is in charge of the sale, what sales price, offer price will be, how to lower the asking price, how to change the realtor, and the entire process of selling a home. The process needs to be spelled out in detail, or real nightmares can occur. We handle this through a document that we draft in a “private letter” agreement, so that it is enforceable against the spouses, but confidential to the rest of the world, as you don’t want buyers of your home to have this information
An extreme example of a nightmare to illustrate this point, is a case where we were called in, after the case to settle a dispute. The parties, in their divorce, had agreed to sell the marital home, with the value set as the average of the selling that wife wanted and selling price that husband wanted. However, wife continued to live in the home until it was sold, and husband was to pay the mortgage. Sure enough, husband wanted the house sold, and wife was good to live in that home, rent free, forever. The parties’ prior attorneys could not see the obvious flaw in this settlement.
The house was on the market for 756 days when we were called in to the case. Wife wanted the house listed at $1.6 million, husband for $450,000. The average of this was $1.025 million. During this period of time, the house also started deteriorating. Husband came up with multiple appraisals showing its true value, but these were rejected by the court because the settlement agreement said nothing about market value or appraised value.
We did finally resolve this case, after much time and grief. But the lesson should be very transparent, you cannot take for granted the process as to how the home will be sold. Even spouses who otherwise get along can disagree on material terms. Make sure your attorney has a plan and experience in addressing issues such as this. Selling a home is difficult enough, make sure you are protected in a divorce.
The house can be appraised, and one party can buy out the equity interest (meaning usually 50% of the value of the home, after deducting for mortgage) of the other party. This is often accomplished through a refinancing of the mortgage and taking out an equity line for the pay out to the other spouse. Assets can also be used to pay out the equity interest, such as trading out the value of one’s 401K account against the equity owed to the other spouse on the home. Sometimes one party will want to add in the cost of sale (were the house to be sold) as well, but this additional term is not always agreed to, but worth proposing in the right case.
The sale of the home can be deferred years into the future, allowing one spouse to remain in the home with the children, and the sale to happen years in the future. If this solution is chosen, the settlement agreement needs to be VERY CAREFULLY drafted. It has to be rock solid, including who pays the mortgage, taxes, maintenance, and there has to methods to enforce the agreement should one party renege. Not maintaining a home can be disastrous; not paying the mortgage can destroy your credit; and not agreeing on how to sell the home in the future can destroy the value of the home.
- Thinking of your children is great, and this solution can be done, but do not rush into it, and each aspect has to be thought through. There has to be real, and often “insensitive” but utterly unambiguous terms regarding specifically when the spouse living in the home needs to move out of the home.
- Deferring sale of the home into future is not an easy proposition legally, and can be a dangerous thing to do financially. Make sure it is the thing that you want to do, and make sure that all the issues are thought through and documented without ambiguity for future enforcement.
If your house is upside down, this creates some real problems. But this is a more and more common fact in Georgia divorces that divorce courts have had to address. Often, it works out best for one spouse just to stay in the home when possible, and make provisions for addressing the negative equity.
Contact us or call today to learn how Shaw Law can work with you to achieve the best outcome possible for you and your children.
Scott Shaw is founder and principle of Shaw Law Firm PC, founded in 1995 and dedicated solely to divorce, family law and child custody matters that must be addressed and decided in the state of Georgia. Shaw Law Firm serves the greater Metro Atlanta area, particularly the counties of Fulton, Gwinnett, Cobb, Cherokee, Forsyth, Paulding, Henry, Fayette, Coweta, Newton, Walton, Bartow and Douglas. Schedule a consultation today at 770-594-8309.