Many divorce clients are faced with the issue of having a single piece of real estate, which cannot readily be divided into two dwellings.  Their reasonable question is: what are the alternate ways of dividing the real estate?


In a divorce, the Court must equitably divide joint and community property.  As the house is not divisible, the three remaining alternatives are:  1) Husband buys out Wife; 2) Wife buys out Husband, and 3) The property is sold and the proceeds divided. 


While the first two scenarios may often be the simplest, there are still many potential issues.  Some of the difficulties include: how to arrive at a fair valuation of the real estate; should hypothetical real estate commissions be considered; who pays for the mortgage and utilities until the house is transferred; will the mortgage be transferred into the name of only one party; what is the time frame in which payment must be made; will the spouse being bought out have a security interest in the property until paid in full?


When the house is to be sold, and the proceeds to be divided, the potential issues are different.  Some of the difficult issues include: Who picks the sales price; Who selects the real estate professional; Who determines which offers to accept and which to counteroffer; Who, if either, remain living in the house until sold; Who is responsible for payment of the mortgage, utilities, and other expenses; Who is responsible for keeping the house in showable condition?


Once the house is sold, the parties also need to determine how to divide the equity.  Will the equity be used first to pay off certain debts of the parties?  Is one side of the other entitled to a disproportionate share of the equity to equalize other aspects of the divorce? 


Another variation to this third alternative is when neither party can afford the house, and the parties agree to allow the house to go into foreclosure and/or both parties anticipate filing for bankruptcy during or after the divorce. 


Because of all of these complexities, parties going through a divorce who own one or more pieces of real estate should have an attorney to ensure that their rights are protected and that any written agreement is explicit enough to avoid future litigation over ambiguous settlement terms.

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