America is experiencing rampant monetary inflation, which in turn has caused asset inflation. And houses are going up at 10-15% every year. In divorce, disposing of the residence raises a lot of tough questions that the parties should answer and a serious analysis of the options.
Some questions to ask would be does any party want to keep the house and, if so, can the party who wants the house be able to refinance it or buy out the other spouse using their finances to the other party.
Also, even if the principal on the mortgage is not being paid down, the equity in the residence is growing at the inflation rate because the real estate is roughly appreciating at the inflation rate. This is good because both parties have more money when the house is sold. Bad because the buying spouse must pay more money for the buy-out. If the answer to these questions is no, then the easy answer is to sell the house and split the net equity or the parties can stay joint owners. Why? Because the prices are rising so rapidly that if you sell you may never be able to buy back into the market.
An option would be to keep the house and the parties remain as tenants in common.
Can the parties cooperate after divorce for their future well-being? Well, that’s a loaded question. Since couples generally get divorced because they have irreconcilable differences, remaining joint owners of a residence may be challenging.
Tenant Spouse or rental? If one party stays in the house and becomes a “spouse tenant” and both parties are on the title and loan, generally the out-spouse will not qualify for a new loan to buy his/her own residence because of the existing mortgage.
The easier option is to keep the residence as a rental. This raises other questions: Does the rental have a negative cash flow if any? Who will manage the property? Is the basic maintenance being outsourced or one party doing the handyman work? Are you splitting the tax deductions?
Being a landlord has its own issues: Repairs, management, tenant interface, etc. So, a house appraisal or valuation is just a data point in time. Keep in mind, too, that real estate is subject to market correction.
