Often in divorce mediation, the bitterest fights couples have is over who should keep the family home. It is common for couples to agree that the custodial parent should remain in the house until the kids have finished high school.
But what then? Do the parties sell the house and split the profits? Does one party buy the other out? And if there are no kids, should the marital home be put on the market immediately? Can one party afford to buy the other out right away?
Parties often have an emotional attachment to their house and want to cling to it – even when it’s not very practical.
One man insisted on buying his wife out of her share of the house because he couldn’t stand the idea that the house he’d so painstakingly renovated would now be enjoyed by his wife’s boyfriend!
One woman didn’t want her husband to buy her out, because she felt that the marital home was their prize possession – and if he ended up with it, he’d “win.”
When parties are discussing in mediation what should happen to the marital residence, we not only bring up the benefits of one party retaining the house, but the downsides. It’s often the negatives of buying out your ex that get overlooked:
- You’re going alone into the unknown: In all likelihood, when you were married, you had two paychecks to pay the mortgage and taxes on your house (or maintenance on your co-op.) Maybe you’re very good at math! And you’ve calculated that you on your own can afford the carrying charges on the marital residence. But things change – you can’t predict how much your taxes will go up in ten years, or your maintenance charges! And what about paying for repairs? And worse-case-scenario – what if you lose your job? Could you carry your home until you were employed again?
- Have you traded away too much of your future? As a way to buy out their spouses, many parties are wiling to forgo their rights to retirement funds. If you’re young, you may see this as something that has little effect on you, but overtime you could be sacrificing a large amount of financial security when you reach retirement age.
- Liquidity vs. Walls: Some parties love owning an asset they can walk into, has windows, and walls, and even curtains! But for all the joys of owning a house, co-op, an igloo – it’s not a liquid asset (yes, even the igloo!). If you need to turn that co-op into cash, you need a broker, a buyer, a banker, and it will be months (if not years) before you see money. And though the New York real estate market seems to move in the exact opposite direction as gravity – it does have unpredictable lows. So you really don’t know what an assets with walls is worth, until the day it’s sold and a check is handed to you with exact dollars and cents.
A party may have a very emotional attachment to keeping the marital home. But if you can’t really afford it, are sacrificing too much of your financial future, and are better off with liquid assets, your home won’t be your castle but an albatross around your neck!