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You and your spouse have years of great memories in your second home; you may have spent family vacations there or used the second home for extended romantic weekends.
So, what happens to your second home when you and your partner decide to go separate ways? We’ll take a look at the various complexities of second home division during divorce and review each of your options as to what you should do with it.
Before you can start thinking about what to do with your second home, you need to understand property ownership, which refers to who owns the second home, and there are a few complexities to consider.
The property may be in the name of one spouse, but this doesn’t necessarily mean they are entitled to the home in the divorce settlement. During the settlement stage, a judge may find both spouses are responsible for the property’s mortgage payments, upkeep, and annual taxes.
However, to help keep things simple, there are three basic types of property ownership:
Determining the ownership of the second home in a divorce is a crucial step to deciding how both parties proceed.
You may want to place a dollar amount on the memories you made in the second home; however, it ultimately doesn’t affect the property’s value. Instead, an appraiser will consider the home’s location, condition, and current market trends.
The market trend refers to whether it is a buyer’s or seller’s market. If you and your spouse are planning to put the home up for sale, you want a seller’s market, which will help you get the best possible price for the property.
While researching the selling prices of similar homes in the same area can give you a good idea of the property’s value, there are a few other factors to consider. If you made upgrades and completed renovations, this can add to the home’s value. Factors like these are why it is always best to work with an appraiser to ensure you and your spouse receive fair market value.
The value of the property will be figured into your divorce settlement. For example, if you are actively buying your spouse’s half of the property, you don’t want to pay more than necessary. The opposite applies if you’re selling your share of the property. You want to pay your spouse a fair market value, not more or less.
You and your spouse have options regarding your second home. Which option is best for you and your spouse ultimately depends on whether one or both of you want to retain possession of the property, and there are also advantages and downsides to each of the following options.
Okay, this option seems pretty straightforward; sharing the property means everyone gets to use it. However, this option only works when both spouses can reach an agreement and tends to make sense for properties like family vacation homes. Otherwise, this is when things can get complicated.
Sharing the property means everyone has equal time, and deciding who gets to use it when can get messy quickly if you haven’t outlined what this looks like ahead of time. Some ideas to help make property sharing go a little more smoothly include:
If you want to keep the second home, but your spouse doesn’t want the hassle, consider buying out their interest in the property. An appraiser, approved by both of your lawyers, will let you know the property’s fair market value.
From there, you can pay your spouse for the value of their share. You may also be able to trade an asset of equal value for their share of the property.
Sometimes, it’s best to sell your vacation home during the divorce. After all, it is a reminder of your past. After your divorce is finalized, you can start looking for another vacation home where you can make new memories. Selling the home can also make your divorce negotiations go a little more smoothly and quickly.
Before placing the home on the market, you also want to carefully consider your decision. Don’t let emotions over the divorce dictate your decision. You may regret selling once your emotions are settled down.02
Your divorce attorney is there to protect your rights during negotiations, and they’re also a great source of advice to help you navigate the process. Along with giving you sound legal advice, your attorney can help you make decisions regarding what to do with a second property.
Carefully consider all of your available options, and don’t let your emotions control your actions. Who knows, maybe you’ll end up making new memories in your second home.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.