The most valuable asset in many divorce cases is the marital home. The disposition of this asset can have a significant impact on the financial health of the parties after divorce.

Additionally, special considerations must be given to other pieces of real property that the couple owns. There are several options in determining how to deal with real estate in a divorce case. However, there are certain steps that must be taken before considering what is the best solution.

Determine Its Value

Before you can make an informed decision about how to handle real property, you must have a better understanding of its value. In many cases, spouses do not agree on the value of a property. However, this does not mean that litigation must ensue on the subject. The parties can agree to a value that is determined through third-party verification.

One basic value that can be used is the tax assessed value. Parties receive an updated assessed value each year. However, this derived value has the drawback of usually being inaccurate. This figure may be off by 10 to 20 percent.

Another option is to have a realtor complete a market analysis of the property. This strategy attempts to assess the value of the home based on data specific to the area, including the sales of recent homes in the area that are similar in nature to the property in question.

The most accurate type of assessment often comes from a professional appraiser. The couple may split the cost of hiring an appraiser in order to quickly ascertain an accurate value of the property.

Determine Equity

Equity represents the amount of the house that the parties can tap into. It is determined by subtracting the cost of any mortgages or loans against the property from the estimated value of the home. If the divorce court determines the equity of the property, it usually excludes the closing costs and other costs associated with the sale of real estate unless the property is actually to be sold as part of the divorce directives.

Once the amount of total equity is determined, it is necessary to determine the equity that belongs to the marital estate and the portion that is separate property. For example, a person may have purchased a piece of property before marriage. Then, the spouses may have invested money in the property and the property’s value may increase. In this situation, the property would not be split 50/50. The amount of the appreciation since marriage may be subject to division, but the separate property interest would still be retained by the original owner.

Divide the Asset

Knowing the property’s value and the equity that is due to each party can lead into a discussion regarding the best way to divide an asset. There are several options regarding how to divide the asset. One option is to allow one party to continue to occupy or to fully own the property. If this is the final result, the other party deserves to be compensated for his or her interest in the property. This may be effectuated by awarding other assets to the party that make up the same value as the real property interest. If the remainder of the marital estate is not large enough to fully compensate the party walking away from the ownership interest, the parties may agree to receive compensation over time.

If one party will retain ownership of the property, it is important that the other party have his or her name removed from the deed and the mortgage. Being listed on the deed will require that person to agree to a later sale of the property. Being listed on the mortgage will make the person still obligated to the debt. The spouse who retains the property may need to have the mortgage refinanced in order to remove the other party’s name. This step is also important because even if a court orders one party to pay on any secured encumbrances against the property, this order is not binding on creditors. Therefore, if the other spouse’s name is still attached to the mortgage and the spouse living in the residence does not pay, this can adversely affect the other spouse’s credit.

Sale of Property

In some situations, the only plausible solution is to sell the real estate. The expenses related to the sale and the payoff of any encumbrances are deducted from the sales price before determining the net proceeds. The proceeds of the sale are then provided to the spouses in proportion to the equity interest that each spouse has. The parties may even agree to sell the property at a future date in time, such as when the youngest child graduates high school.