Sell the house and split the proceeds

It may be hard to decide how was once "ours" gets allocated into "yours" and mine." Your attorney can help solve the first riddle of whether the house is separate property or marital property.

New Jersey is an "equitable distribution" state. Translation: the marital property will be distributed in a manner that is fair, but this does not necessarily mean that it will be an equal 50/50 split. There are a host of factors the court will take into account in determining what is "fair."

It is prudent to do your due diligence early on in the divorce and this is where a qualified real estate professional is worth their weight in gold. It would certainly be helpful for both parties to know what the marital property is worth and is likely to sell for. McGeehen Realty Group can give you a ballpark figure of its valuation.

We can also prepare a preliminary closing statement and walk you through what is available to divide after closing if the marital property were to sell at a particular price. From our hard-won experience, many divorcing clients forget that selling a house involves additional costs like the NJ Transfer fee, township Certificate of Occupancy, attorney/title fees, and the like.

Divorce tends to muddy the question of who is responsible for paying for these unanticipated expenses. We can help you get your financial house in order and determine what your net proceeds will be if you decide to sell.

The decision to sell the marital property and split the proceeds may be an attractive option if neither spouse can afford to buy out the other, or if there is some doubt as to whether the home can be maintained, a good segway into the next option.

You buy out your spouse's equity

One of the divorcing spouses may want to retain sole ownership of the marital home without the upheaval of moving out

One of the divorcing spouses may want to retain sole ownership of the marital home without the upheaval of moving out - they want to stay in the home. If either spouse decides to keep the home for themselves, both parties must determine how to handle future mortgage responsibilities and any equity in the property, and this can be a point of contention. There can also be future tax consequences regarding capital gains. 

A buyout works only if the spouse keeping the home has the cash on hand to fund it, or they can qualify for a new mortgage. We want to put an asterisk on this because if the marital property is not owned outright, the mortgage may have to be refinanced.

We say that because our clients need to be realistic about what both spouses can afford. McGeehan Real Estate Group, LLC can help you pencil in numbers to see if a buyout is a viable option.

Keep the house until the children move out, then sell and split the profits.

Many divorcing couples postpone a decision with respect to marital property even though one spouse occupies the premises. This is common when there are children involved. Rather than uprooting the children from friends and familiar surroundings, the spouses decide to keep the status quo.

Some divorcing couples postpone financial decisions about the home and decide in the interim to retain joint ownership for a period of time even though only one spouse lives there. This is common where children are involved and the parents do not want to uproot them from friends and familiar surroundings.

When the children become, the couple sells the home and splits the profit. If you're the one who moved out and you haven't lived in the house in two of the past five years, you could owe taxes on the profit from the home sale.

Fortunately, there's a workaround. If your divorce or separation agreement outlines your future plans to sell the house, the IRS considers that as meeting the two-out-of-five-year residence rule.

Keep your eye on tax considerations that may change from the time of your divorce to the time of the ultimate sale. Also, it is a possibility that your spouse can decrease the value of the home by failing to maintain it.

Conversely, however, the joint owners can get a higher eventual sale price by waiting to sell. If the real estate market is in a downtrend, it may be worth it to wait for a market correction and defer the sale of the marital home.

There are many pros and cons of co-owning a house after a divorce, and McGeehan is happy to dialogue with you on what this all entails.