What a divorce means for one's real estate portfolio

This article looks at some of the issues related to the family home that arise during a divorce.

Typically one of the most difficult issues to resolve during divorce negotiations is deciding what will happen to the couple's home. As MarketWatch points out, the home is a complicated asset to split since it is not just a large financial item but an emotional one as well. Furthermore, there are laws that deal specifically with what can happen to the family home during a divorce. While many people may think that getting the house at the end of a divorce negotiation is a "win," in many cases the house could prove to be more a burden than it's worth.

Selling and splitting the proceeds

Often the easiest solution to dealing with the house is by selling it and simply splitting the proceeds. However, this is often easier said than done. For one, there will likely be a temporary restraining order on any marital property during the divorce. What that means is that one spouse cannot sell the house without the other spouse's consent, regardless of whose name is actually on the deed. However, if both spouses can agree on a selling price then there may be significant advantages to selling the house outright, including tax advantages and even a feeling of starting life anew.

Risks of keeping the house

Holding onto the house isn't always a bad move, but it is one that should not be rushed into. In most cases, the lower-earning spouse is going to have a difficult time maintaining the house and making mortgage payments on it, even if he or she is receiving spousal support. Furthermore, as the New York Times points out, the person who keeps the house will likely have to qualify for a new mortgage on their own, which can be extremely difficult for those who are stay-at-home parents or who don't have well-paying jobs.

Divorce and real estate also pose risks for both spouses' credit ratings. If both spouses have their names on the mortgage, for example, then if a mortgage payment is missed the lender will pursue both spouses for payment, regardless of who is actually living in the home. This can be another motivation to try to sell one's share in the home and get one's name off the mortgage faster.

Finally, many people fall into the trap of believing that the house provides the greatest long term financial protection. However, in addition to the costs of maintaining a house and keeping up with mortgage payments, it is important to keep in mind that there is no guarantee that the house's value will actually rise substantially in the future. Real estate markets are notoriously volatile. Other assets, most notably retirement accounts, tend to appreciate at a much higher rate than real estate.

Family law and real estate

Deciding what to do with the family home is a difficult decision. That's why anybody going through a divorce should contact a family law attorney for assistance. An experienced attorney can help clients map out a strategy that will help them protect their best interests today and in the future.