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It's perhaps no surprise that for divorcing New Yorkers, who gets the apartment—and how—is among the biggest sources of contention. That's because not only is a home probably the most valuable asset a couple owns together, it's also riddled with memories and emotions.
So, what to do if you want to buy your (soon-to-be-ex) spouse out of your apartment and keep it for yourself? We checked in with experts for advice on keeping things clean, simple and fair.
First, make sure you actually want to stay in the apartment or house.
"Generally, my take on this issue is to recommend that someone be absolutely certain that they are able to carry the costs comfortably moving forward, and that they really want to," says Elise Pettus, founder of UNtied, an online divorce resource. Those costs she's referring to include monthly maintenance and mortgage. "In my experience, a lot of women tend to cling to this idea that they have to stay in the apartment or house 'for the kids!' But in fact, moving can be easier for the kids than they think, and it will them significantly more financial freedom, plus it may help them emotionally to leave the marital home (and its memories) behind and start fresh," she says.
Other experts agree. "In general the cleanest solution is to sell the apartment and split the profit. Then everyone’s equal," says Sara Stanich a Certified Divorce Financial Analyst (CDFA) with Stanich Group.
Now, even if selling right away isn't in the cards, a buyout isn't your only option, either," says Avani Ramnani, a CDFA at Francis Financial. "Sometimes a couple will agree (in writing) that one of them will stay in the apartment until a certain time, "say, when the youngest child goes to college." At that point, says Ramnani, they'll usually sell the home and split the money then. "I've seen many cases work that way."
To find out which way is best for you, of course, "it makes sense to sit down with a financial planner or advisor and hammer out some numbers," says Pettus. In particular, look for a Certified Divorce Financial Analyst (CDFA), who have had the education, ethical standards to uphold, and experience in dealing with divorce. Your typical CFA or, even accountant, doesn't have that training. "The more complicated your case, the more you can benefit from a CDFA," says Stanich.
Now, assuming you want to go the buyout route, here are several things to keep in mind:
Step 1: Determine the value of your home.
The first thing you need to do is figure out how much your apartment is worth (so you can figure out how much you'll be paying your soon-to-be ex). Stanich suggests hiring an appraiser for a few hundred dollars to find out the value. Some people, she says, go back to their brokers and ask, but you have to keep in mind that brokers have some skin in the game (it might be in their best interest for you to try and sell, for example). An appraiser, on the other hand, is an unbiased expert.
"In the vast majority of the cases, we're hired by both parties, because we're neutral," says Jonathan Miller of the appraisal firm Miller Samuel. If things go awry during negotiations, appraisers can be called in to testify in court (whereas brokers cannot), which is something Miller has done many times.
Step 2: Evaluate a source of funds for your buyout.
Step 3: Figure out the tax implications.
When deciding how much to pay your moving-out spouse, you need to keep in mind how much you're going to pay in capital gains tax when you do sell your home in the future. "Sometimes that's part of the settlement," says Stanich.
And, she says, if you're using your retirement or even cashing out stocks to trade for equity in your home, you need to look at the tax impact of that. "It can be major," says Stanich.
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