Property division can be among the most complicated aspects of divorce proceedings. New Jersey courts apply the rule of equitable distribution, which means they divide marital property in a manner that is fair, just and reasonable under the circumstances. In many cases, the marital home is the couple’s largest and most valuable asset. In addition, it has important functional value as the place where children are being raised. Therefore, dividing the home can be contentious.
Although each spouse has a right to a share of the home, there are different paths for achieving that result. Here are the most common options for splitting the marital home as part of equitable distribution:
- Sell and divide the proceeds — The easiest method is to sell the property and divide the net proceeds of the sale. This method works best when there are no minor children living in the house and neither spouse wants to keep the property for a long term. There may be significant issues to resolve, such as an acceptable sale price and which party retains possession while the house is being marketed and sold. The sale price is adjusted to account for mortgage, taxes, insurance, maintenance and other predictable costs.
- Buyout — When one spouse wants to keep the property, he or she can buy out the other’s equity interest. This can be done by giving that spouse cash or a larger share of the other marital assets. If the buying spouse does not have sufficient funds or access to credit to purchase the property, the selling spouse can help finance the transaction in some fashion, such as by co-signing for a new mortgage.
- Co-ownership for the children’s sake — Spouses with minor children may choose to maintain their co-ownership status to keep the children in the home. Typically, the spouse with primary child custody remains in the home until the children are grown and move out. In this scenario, mortgage payments, taxes, insurance, maintenance and repairs are apportioned during the period of co-ownership. The divorce property settlement provides for what the parties will do with the property once the children are grown.
- Co-ownership for economic reasons — In some instances, divorcing spouses choose to hold onto the home due to real estate market conditions or other economic factors that would make a sale disadvantageous. For example, the home may be subject to an “underwater mortgage,” which means the loan balance is in excess of the property’s fair market value. The parties may wait until the mortgage is paid down and/or the property value increases such that they can sell without suffering a substantial loss. In the interim, the home may be leased out and the parties can use the rent to pay mortgages, taxes and other expenses.
Kisha M. Hebbon, LLC in Somerset has wide experience representing homeowners in divorce proceedings throughout the north-central region of New Jersey. Please contact us online or call 732-633-2224 for a free initial consultation.
