In a recent article regarding whether or not to sell your house in a divorce, we
briefly discussed negotiating a buyout in a divorce. In order to negotiate a
buyout, couples must decide on the valuable consideration of each person’s
portion of the house. If couples are not communicating well, which is often
the case, this can be especially challenging.
While selling a house as-is to a company like We Buy Houses Richmond is an
attractive and popular option to simplify the selling of the house, sometimes
one partner feels strongly about keeping the house, in which case a buyout is
What is a buyout?
A buyout occurs when one person purchase’s the others interest in the
property. This occurs in a lump sum, OR in payments made over time.
Additionally, these payments do not have to be determined in cash, meaning
that a portion of the buyout could be increased or decreased for either person
to offset other costs owed. For example, one spouse may forfeit interest in
the other’s retirement plan or other assets in exchange for the house.
There are several risks involved in a buyout. There is risk for the person
purchasing the house from the other if the house depreciates in value after a
price is determined. However, the person selling may risk losing money if the
house appreciates in the future. Lastly, because there are tax benefits
associated with paying spousal support, then the spouse responsible for the
support may lose out on certain tax benefits.
First, the divorcing couple needs to determine the value of the house. Real
estate agents are usually not involved in the buyout process, so unless you
have had the house recently appraised, you may have to do some research.
If you have a friend that is an agent, they can provide you with recent home
sales in the area, giving you clues as to your home’s value. Additionally, and
perhaps more reliably, you can hire someone to appraise the house. While an
appraisal can cost between $300-500, it will remove any debate as to the
current value of the house, and hopefully make negotiations easier. If after an
appraisal, the couple still cannot negotiate valuable consideration, a judge can
decide (but he will most likely want to rely on an appraisal.)
Below are some considerations regarding how to determine the buyout price:
● Maintenance: If the house needs maintenance or updates, this can
affect the worth of the house, and what one spouse receives.
● Spousal support: If one spouse potentially owes the other money after
the divorce, their part of the house value might be used for the amount
● Refinancing: Consider the cost to refinance the house. If one spouse is
keeping the house and buying out the other person, they will need a loan
in the amount of the remaining total owed.
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