Negotiating a House Buyout at Divorce

A divorce house buyout is one of the options for dividing the family home when terminating marital relations. It is appropriate in cases where spouses decide to avoid selling the property and keep it after the dissolution of marriage. How to buy a spouse out of house will mostly depend on your arrangements with the other party and the way you own the property.

This article will focus on what a buyout is and how to assess its value. In addition, we will answer the question, “How do you buy someone out of a house?” and give some tips on this procedure.

What Is a Buyout?

Property buyout in a divorce is the purchase of a house part belonging to the other spouse to become its sole owner. Most often, parties use this method of dividing the family home in uncontested cases when either spouse wants to keep it instead of selling it and dividing the proceeds.

Parties may decide to repurchase the property for any of the following reasons:

  1. Either spouse has a strong emotional attachment to the house and wants to continue living there.
  2. It benefits financially, particularly when the mortgage is paid off almost entirely.
  3. The couple has children, and living in the family home guarantees them stability and less stress associated with parental divorce.

You can agree with your spouse to buy a part of the house regardless of whether it is bought or mortgaged. Under Texas law, all property acquired during your marriage is considered your joint ownership and must be divided in a divorce no matter whose name is on the papers. If you decide to keep the real estate and become its sole owner, you will need to draw up a buyout agreement for the house. In most cases, this contract will be an appendix to the final divorce decree. In it, you should specify all the terms of a buyout, including the value of the ownership to reimburse, the method, and the deadline for payment.

How Is a Home Buyout Calculated in a Divorce?

There are several methods to determine the amount of money you must pay the other party to become the owner of their share of the property. How to calculate buying out a spouse’s house part will depend on the way you acquired the family home.

If you purchased it during the marriage, it will be considered your joint property and should be divided just and right (TFC 7.001). To repurchase a part of it, you must determine its market price and the other party’s equity.

You can evaluate the house in several ways:

  1. You can manage it independently. If you and your spouse have no disputes regarding the value of the family home, you can agree on its price by analyzing real estate websites in the area where it is built.
  2. You can contact a real estate agent. They will not estimate the value of your house but can provide information about the cost of properties similar to yours.
  3. You can hire a professional appraiser who will accurately determine its value, taking into account all its features, such as area, state of repair, location, etc.

Although hiring an evaluator is the most expensive way to define the price of the home, it is one of the most reliable options to find out the exact cost of your property.

If you took out a mortgage and have not repaid it yet, you will need to calculate each spouse’s equity and the outstanding mortgage balance. In most cases, the amount you must pay to the other spouse will equal half of the total sum of the paid mortgage. To become the single owner of the home, you will need to offset your spouse’s equity and commit to paying off the balance of the debt. In other words, you will need to refinance the mortgage.

How Do You Buy Out a House in a Divorce?

Depending on the arrangements with your spouse and your financial capabilities, you can agree to a one-time or gradual buyout in divorce.

Here are some basic approaches to buying out a part of the house:

  1. Pay the other party in cash. If you have enough money to repurchase the spouse’s share in the family home at once, you can enter into a buyout agreement similar to a regular property purchase contract. It is the easiest way to become the sole owner of the real estate after a divorce. However, this method will not be optimal if you do not have enough savings and need time to accumulate them. You can agree on a gradual buyout if your spouse does not object. For example, you can pay part of the funds in one lump sum and divide the rest into several payments. Whatever your arrangements are, you should specify them in the agreement.
  2. Exchange other assets for the part of a marital home. If the divorce is uncontested, you and your spouse can decide how to divide assets yourself. You can keep the house while the other party can become the sole owner of a business or joint accounts. You need to set out your arrangements in the final divorce decree indicating what property will belong to each of you. This method has many advantages; in particular, it allows you to avoid selling the house and divide the marital property fairly. However, it may not be appropriate if you have a mortgage.
  3. Refinance the mortgage. If you and your spouse take out the mortgage, you are both responsible for paying the debt, regardless of whose name is on the contract title. You can resort to refinancing to pay for a part of the house owned by the other party and remove their data from the documents. In other words, you will need to take out a loan sufficient to refinance a divorce buyout and pay off the previous debt. It may be suitable if you are entitled to favorable credit terms. However, rising interest rates can result in an unsustainable increase in monthly payments.

Each of the ways to repurchase a part of the house has its advantages and disadvantages. You can choose any of them taking into account your case-specific circumstances.

Tips to Approach a Buyout During Divorce

The process of buying out the other spouse’s part of the property can be stressful and confusing. The following tips may help you deal with it:

Determine the Home Value

This is one of the first stages to go through. To agree with the other party on how you will repurchase their share, you need to determine your equity, the price of the property, and the mortgage balance, if any.

Gather Funds

In most cases, it is more profitable to buy a part of the house at once. If you can borrow money from friends or family to repurchase it, you may consider this option. If you’re just planning to file for divorce, you can start gathering funds in advance.

Consider Custody

In cases involving minor children, the court may reserve the right to live in the family home to the custodial parent without the requirement to buy out the other spouse’s share. To become its sole owner in the future, you can agree on a gradual buyout that will last until kids reach adulthood.

Negotiate on Spousal Support

If you are a spouse who can claim alimony, you can agree with the other party to waive spousal support in favor of reducing the value of their part of the house. It can help you repurchase the property they own more quickly.

Refinance the Asset

If you have mortgage debt and want to keep the house after the divorce, you can contact the creditor and ask them to change the contract by removing the other spouse from the title. Since the lender will most likely not consent to your request, a better option may be to refinance the mortgage. Using refinancing, you will be able to pay for the other spouse’s home part and become a sole debtor.

Check for Maintenance

You can try to negotiate with your spouse so that they reduce the price of their share if your house needs repairs that you did not have time to do during the marriage. You can justify your request by the fact that even if you were to sell the house, it would lead to a decrease in its value.

Having decided to divorce, you can sell your marital home or buy out the other party’s share and become its single owner. You can negotiate with your spouse on a one-time or gradual buyout, mortgage refinancing, or asset exchange for keeping the home on your own.

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