For many couples, their home is their most significant asset. For that reason, negotiations over the disposition of the couple’s home often play a significant role in divorce mediation. Following are some of the key issues that a couple engaged in divorce mediation might need to consider:
After the Divorce – To Sell the Home or Keep It
The question of whether to keep the marital home after divorce hinges on a number of factors. On the emotional side, couples may not want to have to relocate their children. The adjustment to the divorce may be all that the children can handle. Adding a move might seem too much of a change in the children’s lives. Obviously, very young children would be less affected by this move than older children who have friends in the neighborhood and attachments to the physical surroundings.
Unfortunately, many couples do not have the luxury of keeping one parent in the home with the children even when they would like to do so. Many couples, after evaluating their finances, find that they need to access the equity in the home in order to afford two residences. That assumes, of course, that there is equity in the home. Many couples entering divorce mediation find themselves in the unfortunate situation of having debt on their home that exceeds its value. In that case, couples often decide to hold onto the house until that market picks up and increases the home’s value.
The Expense of the Home after Divorce until Sale
Divorce mediation sometimes results in the decision that one of the parties will stay in the house for a period of time after the divorce. Sometimes until the market turns around, other times until the children graduate from high school. Regardless of the reason, the couple must make a number of decisions about how to finance the home until it is sold. Usually the party who will live in the home will pay the day-to-day expenses of the home such as the mortgage, real estate taxes, insurance and utility bills. Alimony and child support often help to meet these expenses. Larger expenses, such as major repairs or capital improvements are often shared by the parties in some fashion since such expenditures help maintain the value of the home which is a jointly owned asset until it is sold.
After Divorce – Protecting your Asset
If the parties decide in divorce mediation that one party will remain in the home and pay the mortgage until a division of proceeds on a sale date down the road, the party not living in the home may be concerned about making sure the mortgage is paid to protect his or her investment. Sometimes the parties will agree that the party residing in the home will provide proof that the mortgage is paid—either monthly or only upon request. In addition, the non-resident party may have the option of paying the mortgage on behalf of the party living in the home, if he or she fails to do so. In that case the non-resident party may be reimbursed for such payments at the time of sale “off the top” before the division of sales proceeds. Alternatively, if the non-resident party has an obligation to pay alimony to the resident party, mortgage payments may be deductible from the alimony payments that come due.
Dividing the Proceeds of Sale in Divorce
While couples in divorce mediation most often decide to divide the proceeds from the sale of the house equally, that is not always the case. A number of factors might lead to an uneven division of the sale proceeds. For example, sometimes one of the parties provided a large sum as a down payment on the house. The parties may decide in divorce mediation that it is equitable for that party to be repaid before dividing the balance of the proceeds. Another consideration might be that the house was formerly owned by the family of one party. In other cases, one party may opt to take the full value of the house in exchange for the other party retaining other assets of equal value. In that case it is important that the party keeping the house does not become “house poor” because of a lack of liquid assets. It is important not to let an emotional attachment to the idea of keeping the house override good financial judgment.
In conclusion, there are many issues surrounding the marital home that need to be decided by a divorcing couple. Hopefully, through divorce mediation, the couple will make well thought out decisions that will serve them well in their futures.