Marital Home & Other Real Property
What happens to the Marital Home in a Divorce?
For many going through a Georgia divorce, the marital home and other pieces of marital real estate are their largest assets. Whether or not the marital home or real estate should be retained and by whom is often a major issue in the divorce. What happens to the family home will ultimately depend on the facts of each case. If the spouses can agree between themselves regarding what will happen to the marital home and other real property, it is likely that the court will approve such a settlement agreement. However, if the couple is unable to come to an agreement, the court will decide the issue. If you are considering divorce or if you are currently going through a divorce, there are several options to consider when deciding how to handle real property.
At a basic level, you must first decide whether or not
you want to keep the house or sell. There are several factors that may affect
your decision here. In 2024 and beyond, inflation in the U.S. will likely
continue to be a major factor. Inflation has resulted in higher mortgage rates.
Selling the house now, could mean you'll have to purchase a house with a much
higher mortgage rate. Refinancing and keeping the house may result in the same.
With inventory low and prices high in the Georgia real estate market, you may
be tempted to sell the house and split proceeds. However, you should consider
where you will live once the house sells and whether or not you will be renting
or getting a new mortgage. It's critically important to think about where you
live post-divorce and how you will afford it.
What are my Options for the Marital Home in Divorce?
Selling the Home
The first option is to sell the marital home.
This option is most often chosen by spouses who both do not wish to retain the
marital home (or cannot afford the house individually). A couple who chooses to
take this option may decide how and when the sale will take place and may even
come to an agreement concerning their desired sale price. Once the home is
sold, the profit may either be divided between the spouses or given entirely to
one spouse as a form of property settlement or spousal support. Keep in mind
though that this division of money from the sale of the marital home is
generally made after paying off the mortgage and the costs associated with the
sale, such as commissions to the real estate brokers, transfer tax, and
attorney's fees. The decision regarding whether you should sell your house upon
divorce will likely be a difficult one, but it is a decision that needs to be
made devoid of emotions. It is best to focus only on whether or not it is
financially beneficial to keep the home. Retaining a home that you are not able
to afford or maintain post-divorce is one financial hardship that may be
avoidable.
One spouse Keeps the Home for a Defined Period of Time
Another option is for one spouse to be granted exclusive
use of the marital home for a specified period of time. This route is normally
taken by couples who still have minor children and who wish for the children to
grow up in the marital home.
When there is an agreement allowing one spouse to remain in the marital residence post-divorce, arrangements need to be made for payment of expenses related to the house. It is common for spouses to agree that the party living in the house will pay the mortgage, property taxes, utilities, and routine repairs. Alternatively, the spouses may agree to share these expenses, or the spouse who is not in possession of the home may assume responsibility for these costs as a form of child support or alimony. Again, your settlement agreement may be crafted to fit the particular needs of your family. Seek the advice of one of our divorce attorneys for more details. It's always best to try to come to an agreement and make sure that the settlement agreement reflects that. When no agreement can be reached, it can lead to a standoff over the marital home.
One Spouse Keeps the Home Indefinitely
Yet another option is for one spouse to keep the
marital home and buy out the other spouse's share. When a court order or a
marital settlement agreement gives the entire interest in the marital home to
one spouse and makes that spouse responsible for paying future mortgage
payments that does not mean the spouse who moves out is no longer potentially
liable for the mortgage. If both spouses are listed as borrowers on the
mortgage documents, the spouse who is no longer in possession of the home may
still be held liable for payments if the other spouse fails to make them. In
this situation, the best practice is to have the spouse who will retain the
home refinance the mortgage into his or her name alone. This way, only the
spouse in possession of the home will be legally liable for the mortgage
payment.
What if Part of the Home is Separate Property? Source of Funds Analysis
It is sometimes the case that one party either acquired the marital home or other real property prior to the marriage, or used a significant portion of separate property to acquire the real estate or make the initial down payment. This fact may have an impact on how the marital home is divided between the parties, especially if the parties improved the home or reduced the balance of the mortgage using martial funds. When this issue arises, it is often difficult to determine which portion of the home should be deemed marital property and which portion should be deemed the separate property of the spouse who made the initial investment. Thus, it becomes necessary to implement what is known as the source of funds analysis. This analysis or formula was set out by the Georgia Supreme Court in the case of Thomas v. Thomas, 259 Ga. 73 (1989) and as a result is sometimes referred to as the Thomas analysis. The purpose of this analysis is to determine the percentage of an asset or debt (most often marital homes or other types of real estate) that is marital property versus the percentage that is the separate property of one spouse. Although your divorce attorney will aid you more in understanding this process, below is a streamlined version of the source of funds analysis for determining each party's respective financial interest in a marital residence.
Source of Funds Analysis
- Determine the amount the husband contributed to the home
- Determine the amount the wife contributed to the home.
- Determine the amount contributed that was marital.
- Determine the amount of marital funds used to reduce the principle balance on the mortgage.
- Determine the value of the home. For example, refer to the purchase price of the home or obtain a current appraisal.
- Determine the total money contributed to the asset (1+2 3).
- Determine husband's percentage of the home's appreciation (1 divided by 6).
- Determine wife's percentage of the home's appreciation (2 divided by 6).
- Determine the marital portion of the home's appreciation (3 4 divided by 6).
Numbers 7, 8 and 9 should equal 100% of the home's appreciated value. Once it is determined which portion of the home is separate property and which portion of the home may be classified as marital property, the next step is to decide how the home will be divided.