Divorce is difficult for everyone involved and no one wants to drag out their divorce.…
When people face separation or divorce in Raleigh, NC, who gets the marital home under North Carolina Divorce Law? As a Raleigh Divorce Lawyer for over 14 years, I have helped hundreds of clients deal with their homes in a divorce, and have handled marital homes in a number of different ways. The answer to the question is that separating couples can divide their marital home by agreement, or through North Carolina's Equitable Distribution statute, N.C.G.S. § 50‑20.
Let us look at the two options and how they may affect you.
Dividing a Marital Home With a Mortgage by Agreement
There are many issues that need to be addressed when a home is still being financed.
- If your home is secured by a mortgage, only consider a party that can afford the mortgage payment alone to keep the property.
- If the home is secured by a mortgage in both parties name, the home will need to be refinanced. Can either party qualify alone?
- Is there enough equity in the home to refinance it even if one party has sufficient credit and income to make the payments?
- If the mortgage is only in the name of one party, it is generally preferable and cheaper to have that party keep the home.
- Before entering a binding agreement, the party taking the home should pre-qualify if they are going to refinance the loan.
- Consider how long a party will have to refinance, who will receive the tax deduction, and who will take care of repairs.
- Consider all expenses associated with the home such as insurance, taxes, repairs, maintenance, etc.
- If refinancing will occurvprior to divorce, the parties will usually need a recorded Memorandum of Separation with a Free Trader Agreement or other form of Free Trader Recording.
- Read you loan document carefully. Many real estate loans include an acceleration clause making the loan immediately payable in full in the event the parties sign a deed making any type of transfer. This could allow the mortgage company to demand full payment if one spouse deeds the property to the other outside of the context of a refinance.
Dividing a Marital Home Without a Mortgage by Agreement
Here are some factors to consider for dividing your marital home without a mortgage agreement:
- Is anyone being paid money for their share of the equity? How will the other party get the money? If you are planning to borrow money against the home, it will complicate matters and you will need additional documentation and legal advice.
- Who will pay the expenses associated with the home for past and future years? Consider taxes, maintenance, repairs, etc.
- A deed is required to transfer real estate in North Carolina.
- The receiving party should ensure all prior taxes and maintenance and repair bills have been paid in prior years.
Agreeing to Sell the Marital Home
Many separating or divorce couples are forced to sell the marital home as neither party can carry the mortgage alone.
Consider the following in such a case:
- Who will pick the realtor?
- Who and how will the price be set?
- Who if anyone will reside in the home while its being marketed?
- Who will pay the mortgage and expenses associated with the home while its being marketed?
- How will an offer be accepted and what if the parties disagree?
- Who will pay for any repairs demanded by a buyer?
- Is there an incentive for both parties to cooperate with the sale?
- What exactly will be done with the proceeds?
- Consider the mortgage balance, realtor fees and closing costs in estimating any proceeds of the sale and to ensure have enough equity.
- Who will claim the mortgage interest deduction for past and future tax years while its for sale?
Having the Court Decide
If parties cannot agree on dividing or selling the marital home, an action for Equitable Distribution must be filed in order to have the property distributed. Equitable Distribution Claims must be filed prior to the entry of a divorce judgment.
In very general terms, the Court will divide a marital home as follows:
- The marital home will be considered as only one asset of the marital estate.
- The entire marital estate will be identified. (marital v. separate property)
- The entire marital estate will be valued according to the fair market value as of the date of separation (and possibly the date of distribution if the parties have been separated a substantial period of time).
- The home will typically be valued according to an appraisal, or other competent evidence of its value. Any disputes in value are decided by the Judge.
- The Court will then divide all of the assets. Most divisions of property are equal, however Courts can make an unequal distribution.
- The home will be distributed to one party or the other OR the Court can order the sale of the home. This is often the case if neither party can afford the mortgage or if there is no other way to divide the equity.
- The mortgage and any other debt associated with the home will also be distributed, and it is almost always distributed to the party who is awarded the home.
- The Court has broad discretion to order a sale of a home or a refinance of the property. They Court can allow sufficient time for such acts to occur and direct how expenses are to be paid.
- Courts will not typically leave a party on a mortgage indefinitely if they are not receiving the home.
A Professionally Written Divorce Agreement is Your Best Friend
The best way to handle any disputes in a divorce is by agreement. The key to any divorce agreement however is ensuring that every element is in fact agreed upon, and that the agreement be formalized in either a contract Separation Agreement and Property Settlement or Consent Equitable Distribution Order so that each party is bound to the terms of the agreement in a legally enforceable way.
Contact a Divorce Lawyer in Raleigh for Support with Your Home Sale
It is essential to seek the advice and counsel of an experienced Raleigh Divorce Attorney who can assist you in this process and provide detailed and specific legal advice. Dealing with real property in a divorce is complicated, and making a mistake in drafting an agreement can result in substantial damage to your finances and your future.