To write a home divorce buyout agreement, you must accurately assess your financial situation as well as the family home's value. Your house may not be as hotly contested as child custody and the property might not even be worth as much as other assets you have to divide, such as retirement benefits. But with the house, you must not only determine what you’re going to do with it but how you’re going to accomplish it if one of you decides to keep it.
Assessing the Situation
Before you sit down to negotiate with your soon-to-be ex and write up your agreement, make an honest assessment of your situation. It won’t do you any good to “win” the house if you can’t qualify to refinance it on your own and you have no other way to buy out your spouse. Consider, too, whether you can afford the mortgage payments without your ex’s help and if you’re willing to give up other things to do it.
If keeping the home is worth more to you than being able to buy a new pair of shoes on a whim – or if you’re in good financial condition so budgeting isn’t too much of a consideration – your next challenge becomes determining the property’s value.
Determining the House's Value
A professional home appraisal is usually the best way to get an accurate value for your home. If you don’t have hundreds of dollars to pay for an appraisal, ask a real estate agent to do a comparative marketing analysis instead, setting a value based on sales of other homes in your area. If you and your soon-to-be ex still get along reasonably well, you might think to simply agree on what you think the house is worth; however, if you’re off by a mile on the home's value, one of you is going to pay too much or receive too little for the home.
After you determine the value of your home, you can determine your equity, which is the difference between the value and your outstanding mortgage balance. If you’re going to divide the equity equally, and if it amounts to $30,000, for example, the spouse keeping the house will have to pay the other spouse $15,000 for his share. A common strategy is to refinance the home for more than the existing mortgage balance. For example, if your mortgage is $200,000, you would have to refinance for $215,000 to buy out your ex.
The provisions for your buyout – including what happens if the buying spouse can’t or doesn’t refinance – would most likely be included in a comprehensive settlement agreement that addresses other issues of your divorce as well, but it can be a stand-alone contract.
Read More: Cash-Out Refinance Explanation for a Divorce
Offsetting Assets or Debts
Offset his share with other assets. If you owe him $15,000 and he has a $30,000 retirement fund that you need to split, you can just let him keep his benefits and call it even, without involving the home's equity. If you don’t have sufficient other assets to accommodate this solution but you have a lot of debt, you could agree to take responsibility for paying off an additional $15,000 in debt to even things out.
Whatever you decide, spell it out clearly in your agreement. When you both sign it, it becomes a legally enforceable contract. If one of you fails to perform, the other can take him back to court. Don't hesitate to take the contract to an attorney for review to ensure you haven't left anything out.
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