What If the House Won't Sell During a Divorce?

By Beverly Bird

There's no legal requirement that you can't receive a divorce until your home sells. However, a depressed real estate market can certainly make it difficult for spouses to end their marriage and move on. If you just can't find a buyer, you may have to get creative. You have options, but not all of them are attractive.

Buyouts

If the house won't sell, one spouse always has the option of keeping it instead, provided he can qualify to refinance the mortgage on his income alone. The spouse who doesn't keep the house is entitled to half its equity -- the difference between the mortgage and the home's appraised value. The other spouse would have to qualify for a mortgage large enough to pay off the existing loan, plus half the home's equity, which he can then use to buy out his partner's interest in the property. If he can't qualify for a loan that large, he can relinquish other assets equal in value to half the home's equity.

Procrastinate

You and your spouse can also elect to co-own your home after your divorce, at least until a buyer comes along. You can wait out the market by renting the property to a third party, or one of you can continue to live there, assuming responsibility for the mortgage payments and related expenses. If your divorce is amicable enough, you can both continue to live there and share the mortgage and expenses. However, you should include language in your marital settlement agreement clearly stating how you're going to handle co-ownership until you can find a buyer.

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Sacrifice Equity

If you've listed your home at $330,000 because the mortgage against it is $300,000 and you both want to walk away from the sale with some cash to start over, you can consider accepting less to hasten things along. Your home might not sell for $330,000, but it might sell for $320,000 or even $310,000. You'll have less cash with which to begin a new life, but you won't be tied to your ex any longer.

Short Sales

If your home isn't selling because it's underwater -- its value is less than the mortgage against it -- you might be able to work out a deal with your mortgage lender to allow a short sale. This involves the lender accepting less than your mortgage balance and writing off the deficiency. If your mortgage balance is $300,000, and if a buyer offers $275,000, your lender would permit you to sell the home for this price and would forgive the $25,000 shortfall. This option will damage your credit, but it may not hurt it quite as badly as just walking away from the house and letting the mortgage lender foreclose.

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Options for Couples Divorcing & Selling a House

References

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Can a Divorce Decree Force a Refinance?

As a general rule, courts – even divorce courts – can't force someone to take on debt. But they can put you in a position in which you must do so to comply with another order. This might be the case if your divorce decree awards you the family home under the terms of an agreement reached with your spouse or because the court ordered it in a property division. You could find yourself in the position of having to refinance to buy your spouse's share of the property.

Can a Divorce Be Finalized With a House Sale Pending?

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What Happens in an Equity Buyout in a Divorce?

Particularly after a lengthy marriage, it's likely that spouses have built up some equity in their assets. With every mortgage or loan payment, they own more and more of the property, and the lender owns less. This equity is a marital asset, and when a couple divorces, each spouse is entitled to a portion of its value. An equity buyout occurs when one spouse keeps the asset and, in exchange, compensates the other for her share of the equity.

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