WHAT ABOUT THE HOUSE?
There are some common questions and misconceptions regarding the issue of
what happens to the community home as a result of a divorce. Below are
some general rules and general ways in which parties address this issue in
California. Remember – these are just general rules and options, ok? There
are a few exceptions that sometimes apply, and of course there might be
unique facts in a case that could change or modify the outcome.
Community Property: The house or condo or real estate owned during the
marriage is usually the largest asset the parties own and it also often times has
some emotional significance. However, just like all other assets acquired
during the marriage, this asset must be divided or accounted for in a fair way.
Deed or Mortgage In Name of Only One Spouse: This fact alone does not
change the character of the property – if it was acquired during the marriage, it
is still community property. The fact that the deed only has one spouse’s
name on it does not mean that spouse owns 100% of it or that it will not be
treated and divided as community property.
How the Heck do you “Divide” a House?! : Good question! No, we don’t take
a chain saw and literally cut it in half (although some folks often want to go
that route!). Instead, what usually happens is one of three things:
1. Sell It: The parties can agree to sell the house and divide the
proceeds. If the parties can’t come to some other arrangement regarding the
house, the Court will likely make an order that it be sold and the net proceeds
divided. So, for example, if the house sells for $500,000, and you owe
$400,000 on the mortgage, the basic net proceeds would be $100,000 and each
spouse would get $50,000 from the sale.
2. One Spouse keeps It: If one of the two parties wants to keep the
house rather than have it sold, that party can “buy out” the other spouse’s
community share. For example, if the house is appraised and determined to
have $100,000 of equity, the party who wants to keep the house could pay the
other party $50,000 (one half of the equity) and have the house be converted
into their separate property. If the party who wants to keep the house doesn’t
have $50,000 in cash to buy out te other party, that party could try to get the
home refinanced and use part of the equity to do the buy out. Another
alternative would be to simply “trade community assets” – for example, if the
house has $100,000 in equity, but there is a community 401k or other
community property that has the same value, the parties could agree that one
party gets the house and the other party gets the other asset(s).
3. Get Creative!: As long as the parties agree and their agreement is
generally fair and reasonable, they can come up with their own unique way to
divide and account for this asset.