One of the most contentious portions of a divorce is the division of assets. In Texas, assets that are bought during the marriage are subject to division during divorce. In many cases, this includes real estate. Whether a family home or treasured vacation property, there are times when one party to the divorce wants to retain full ownership. There are options to make this happen. One common example is to buy out the other’s share. If agreed to, this would allow one individual to retain full ownership of the home. There are many different ways to achieve this goal. Some may choose to offer cash while others could exchange retirement assets, business interests, or another asset of similar value. Those who chose this option can move forward with these steps.
#1: Get a valuation of the home.
It is important to know exactly how much the home is worth before moving forward with negotiations. This is especially important in the Dallas-Fort Worth area as housing prices are in flux. Various factors will impact the value of the home, including its location, condition, and available inventory. Homeowners can use online valuation tools, the Federal Housing Financing Agency’s house price index calculator, and a comparative market analysis to get an idea of their home’s worth. In many cases, it is helpful to hire a professional appraiser.
#2: Negotiate a price and compensation strategy
Once both parties agree to a price, the next step is to find a compensation strategy. The best option depends on each individual situation and, as noted above, can include everything from a cash buy-out to a transfer of another asset of similar value. Once settled, it is important to get legal documents in place to finalize the deal.
#3: Consider tax implications
The Internal Revenue Service (IRS) may require capital gains taxes when selling real estate. There is often an exemption for a sale incident to divorce. It is important to carefully review the transaction to make sure it qualifies for the exemption and mitigate the risk of any surprise tax bills after you finalize the divorce.
These are just a few of the considerations to discuss when negotiating a home buy-out during a divorce in Texas. Those who are working through this situation are wise to discuss the matter with legal counsel experienced in this area of law to better ensure their interests are protected.