Divorce Sales in Virginia

A common question during a divorce in Virginia is, “What happens to the house?”  The answer varies from case to case and depends on several factors.

CAN THE COURT EVEN CONSIDER THE HOUSE DURING DIVORCE IN VIRGINIA?

To be able to consider the house during divorce in Virginia, the asset must be classified in whole or in part as “marital property.”  Marital property is presumed to be any property, regardless of whether it is individually titled or jointly titled, that is acquired during the marriage (from the date of marriage to the date of separation).  There are some exceptions to this rule, including houses that were inherited by one party or gifted to a spouse by a third party, during the marriage.  Sometimes, houses are “part-marital” and “part-separate.”  This type of classification can occur when one spouse used premarital funds for the down payment, but the spouses make mortgage payments or improvements during the marriage with the earnings of either party, such that part of the equity is “separate” and part is “marital.” Pre-marital agreements can help define how the house or down payment should be handled in a divorce.

IF THE HOUSE IS MARITAL OR HAS A MARITAL COMPONENT, WHAT CAN THE VIRGINIA COURT DO WITH IT?

If the house is jointly titled, the Court can offer either spouse the opportunity to “buyout” the other spouse’s interest in the property and remove that spouse from the mortgage(s) by way of a refinance.  The courts do not generally give the spouse who will be retaining the property much time to refinance, usually 2 to 3 months.  If neither spouse wants to or is able to keep the house, refinance and buy the other spouse out of his or her share of the marital equity, then the Court will order the house to be sold and the net proceeds “equitably distributed.”

If the house was acquired during the marriage, but it is only titled in one spouse’s name, then the Court can award the non-owning spouse a “monetary award” based on the equity in the property.  The equity is usually determined by subtracting the mortgage balance(s) from the fair market value of the property.  If the owning spouse cannot afford to pay the monetary award, then the house may need to be sold in order to generate the funds (but the court leaves that decision up to the owner).

Sometimes both spouses are obligated on the mortgage(s), but the house is only titled in the name of one spouse.  In that situation, not only would the Court likely award the non-owning spouse a monetary award based on his or her share of the marital equity, but it would also require the owning spouse to refinance the mortgage(s) so as to remove the non-owning spouse from the liability.

ARE NET PROCEEDS OF SALE (OR THE MARITAL SHARE OF THE EQUITY) EQUALLY DIVIDED?

There is no presumption during divorce in Virginia that assets, including house equity or net proceeds of the sale, should be “equally divided.”  Instead, the Court reviews a number of factors in order to determine the most “equitable” way of distributing the marital portion of an asset in a process called “equitable distribution.”  The factors considered by the Court include, without limitation:

• The contributions made by each spouse to the well-being of the family, both monetary and non-monetary
• The contributions made by each spouse to the acquisition, care, and maintenance of the marital property, both monetary and non-monetary
• How and when the property was acquired
• Debts and/or liabilities associated with the property
• Tax consequences

WHAT SHOULD YOU CONSIDER IF THE HOUSE IS GOING TO BE SOLD IN THE DIVORCE?

It is helpful to include provisions related to the following issues in any negotiated Agreement or Court Order that deals with the sale of a marital residence:

• How the listing agent will be selected
• How communications with the listing agent will be handled
• How the initial list price and any subsequent price reductions will be determined
• How “fix-up” expenses will be paid
• Whether to accept offers that are close to, but not exactly, the list price that is then in effect
• How to pay for repairs that are needed after the home inspection has been completed
• Who will pay the mortgage, taxes, insurance, and other house-related expenses pending the sale
• Who will reside in the house pending the sale
• Will the non-residing spouse still have access to the house to facilitate the sales process?