Current Financial Conundrums: Rising Property Values for Buyers and Sellers During Divorce
The marital home is typically the couple's most significant asset during a divorce. If the home was bought during the marriage, it is a marital asset and will be divided if the couple gets divorced. The home will be regarded as marital property even if it was bought before marriage, transferred into both couples' names, or the mortgage was in both parties names. Before splitting up all of the marital assets between the two parties, a house must first be valued if it is considered marital property.
Nevertheless, a property is not a liquid asset. Simply saying "cash out my house and give me half" is not sufficient. Furthermore, people frequently have strong emotional attachments to their homes, and one divorcing partner frequently wants to preserve the home—especially if the children will continue to reside there.
How then do you value the home to share the equity in the home when a house needs to be divided as marital property in a divorce?
If You Sell Your Home
Selling the house directly is the only surefire way to know how much it is worth. The judge will simply order the sale of the home if the party keeping the house is unable to pay the other party back for half of its value. The parties frequently decide against selling the residence in these circumstances.
The house may still be sold by arrangement, but not immediately. In this case, the mortgage will be the responsibility of the person who maintains the home. However, at the time of the sale, the home-keeper will be compensated for any remaining mortgage that was settled prior to the distribution of proceeds.
Market Comparative Analysis
A comparative market analysis of the house is something a real estate agent will advise if you ask them. Real estate agents use this method to calculate the value of a home. It entails contrasting the home with three other comparable homes that are either still up for sale or have already been purchased.
A comparative market analysis is intended to establish a home's asking price before it is sold.
However, since you aren't selling the house, this valuation is typically off if you are assessing the house's worth. Because practically every home seller anticipates some kind of good faith haggling between themselves and the home buyer, a home's stated price is typically inflated.
Conflicting Assessments of the House's Value
The two parties must each have a different assessment if they disagree on the house's value. For the reasons outlined above, the court will never favor a CMA over an assessment. However, if the two parties hire their own appraisers, the judge would need to hear testimony from each appraiser as an expert to decide who was more trustworthy.
Therefore, take great care when hiring an appraiser because they frequently specialize in the sorts of structures they appraise and the regions they serve. Because a court won't (or at least shouldn't) divide the difference between the two appraisals, it's important to exercise extra caution when choosing an appraiser.
Rising Property Values
The less stable real estate market in recent years served as sufficient justification for some couples to postpone their divorces until they were able to sell their homes for a profit. However, couples could once count on using the proceeds from the sale of their property to buy and furnish their own home. Now, instead of divorcing while the family house is underwater, these couples waited until they could sell the home and begin their new lives with some cash.
While many homeowners desire a sizable "cash-out" when they sell their homes, many are beginning to understand that their rising home values and home equity afford them some financial possibilities they may explore right now.
There are many choices to consider, including cash-out refinancing, obtaining a revolving line of credit (like a credit card), tapping into home equity to receive a lump sum payment, and more.
Although each option has advantages and disadvantages, they all have one thing in common: they provide cash to homeowners who have amassed money through their home equity but are not quite ready to sell their property.