Divorcing parties are often concerned with and ask what will happen with the primary residence during a divorce. Most often, this is not a complicated problem once the value of the home is ascertained. Usually, divorcing couples will have a property appraised and either agree on the appraised value or competing appraised values (which will be averaged)—provided the appraisals were done properly—and the average value will be the value with which the parties, or the court, will work in determining the division of the home equity. The home equity is the fair market value of the home, less the principal mortgage(s) or loan(s) remaining on the home. If one party wants to keep the home, that party may effectuate a “buyout” of the home in a variety of ways to give the other party their fair share of the home equity. Pretty simple stuff.
But, as with many things in divorce situations, what could be a simple transaction often becomes complicated. A more complicated situation occurs when the parties have children who are in the community school system and have a network of friends and activities and both parties want to retain the primary residence. What is the court to do in such situations? Typically, but not always, the family court in Massachusetts will avoid determining who of the two spouses should retain the marital home. If both parties want the home, courts will often order the home to be sold after trial, the equity divided in accordance with the court’s determination of equitable division of the marital estate, and the parties can each buy another home. So long as one of the parties remains within the community and the parenting schedule is shared, the children’s education in the community and their participation in the community network remains uninterrupted.
However, in Massachusetts as well as in most other parts of the nation, real estate inventory is historically low. To add to the challenge of finding alternative housing within a certain community, interest rates have significantly increased in the past few years, and it appears additional interest rate hikes may be likely in the not-too-distant future. Low inventory and inflation have driven home prices up dramatically, meaning that divorcing spouses have to acquire more expensive real estate and trade their existing—usually lower—mortgage interest rate for one that is often double that of the previously existing mortgage. So, the court’s momentum to just order the home sold may be outdated and contrary to the best interests of the children where the parties may not be able to acquire replacement housing within the same community, thus disrupting the children’s community continuity. I have such a case in our firm’s inventory at present.
I contend that the court needs to start “getting its hands dirty” in this real estate market and stop defaulting to the “just sell it” position. With the existing realities of the real estate market and the duty of the court to consider the best interests of the children in divorce cases, a heavier lifting should occur in determining whether to award home retention to one party or another. And we attorneys, as advocates, have to convey to judges that just finding a replacement home isn’t as easy as it once was, particularly in smaller communities.
