Selling or Buying a House During Divorce

There are many issues that are central to hard fought divorce battles, including child custody, spousal maintenance, and division of debt.  Which spouse will receive the marital residence is also often a contentious area, especially where the spouses do not wish to uproot the minor children or where both spouses can afford to keep the house.  There are some cases, however, where one or both spouses may want to sell the house as soon as possible, even before the divorce has been completed.  Other parties may also seek to move forward in their new life as soon as possible and want to purchase a home during the divorce case.  Each issue presents special problems.

Before moving forward with putting your marital residence up for sale, you need to understand that at the beginning of every divorce, an Automatic Temporary Restraining Order (ATRO) comes into effect.  The ATRO addresses many issues, but most relevant here is that it will prevent either party from transferring, encumbering, or disposing of any marital property during the divorce unless the other spouse consents or the court orders it.  This means that you cannot literally decide to sell the house without approval from your spouse or the judge.  If you do come to an agreement with your spouse that the house should be sold, you should have important conversations about the selling price.  The two of you may have very different ideas as to how much the house is worth.  If you disagree as to the worth of the home, you should consider hiring a professional home appraiser in order to get a more accurate idea of the value. You also need to discuss what to do with the proceeds of the home once it will sell.  California is a community property state, so if the home is a marital asset, the proceeds will be split equally.  However, especially where there is a dispute about whether the home is an asset to be distributed, it may be a better option to place the funds in escrow until the judge can decide how the funds are to be divided.  This will prevent either party from squandering an asset that the judge may ultimately award to the other party.

Buying a home during a divorce can also present problems concerning division of property.  If you use marital funds and assets to fund the purchase of your new home, it could be possible for your soon to be former spouse to have a legitimate claim to a portion of the value of the house.  In addition, there is no way to be completely certain about your financial situation at the conclusion of your divorce, and so entering into a new mortgage agreement without knowing for certain what your ability to pay that mortgage will be can mean you have to sell the house after the divorce if it turns out to be too expensive.

If you have questions about how the marital home will be dealt with in your divorce, call us today.  We can talk to you about your assets and what can be done to protect your future.