For most Arkansans, buying a house is their biggest life investment. Often the home is the largest retirement plan, and is their financial security blanket – no matter what, I’ll always have a place to live.
Types of Real Property
Dividing real property in an Arkansas divorce can get complicated. There are two types of real property: the marital home, and investment property.
Analysis: Jointly Owned Property
The analysis is substantially the same for investment property as it is for marital property, except marital property has some added complications to consider. If you have a mortgage on your house, this makes real property division a two part analysis: the equity in the home (asset) and the mortgage/note on the home (debt).
Typically, real property is joint property, with few exceptions. We start with determining the value of the house, and then subtract how much is owed on the house. The remainder is called equity. The equity in a home is considered an asset. If we have a $200,000 valued house and the couple owes $100,000 on the loan, then the equity in the home is $100,000.
Whether acquired before or during the marriage, the home is typically considered to be marital property, subject to an equitable division if the parties paid for it together, paid for improvements together, or otherwise joined their assets together.
In my example above, both parties would be entitled to $50,000 equity.
Sell it, or keep it?
Now, the question becomes do the parties want to sell it and split the money? That’s the easiest, but not always the best. If you have children in the home, providing consistency for the kids is helpful. The primary parent might want to stay in the home with the children, to disrupt their lives as little as possible.
Can the primary parent afford the home, including the mortgage payment, the insurance, the taxes, and the maintenance? Should the spouse have to pay for part of the expenses to maintain the home for the kids on a permanent basis?
Are repairs needed in order to sell it?
If neither spouse wants or can afford it, what if the house needs repairs before it could be sold? What if it’s the dead of winter and houses aren’t selling very fast? Who is responsible for the upkeep and payment for the months until it sells? How long can one spouse live there if the other spouse moved out?
Let’s Get Complicated
Now, let’s get really complicated. The mortgage is in both spouse’s names (or in just the name of the spouse who is moved out) – the spouse that wants to stay there with the kids has decided they can barely cover the mortgage and expenses, but wants to skimp in other areas to stay in the house. How is the moving out spouse going to get off the note so it’s not on his or her credit report? What if the spouse staying loses their job, and can’t pay the payment?
Even if we work toward an agreement where one party takes the home and is responsible for all related expenses in the future, that does not relieve the other party of the obligation made to repay the note to the bank. Additional steps must be taken, beyond an agreement in a divorce decree, for one party to be responsible to release the other party from the mortgage. Otherwise, that party will still be responsible years down the road if the original spouse, who was supposed to pay, doesn’t pay. Being on a note also usually prevents the non-responsible party from buying another house with a new spouse in the future.
If you have more than one real property and/or multiple large assets whether in the form of real property or not, the analysis becomes even more complicated. A divorce settlement of the finances – real property, personal property, assets, debts, is global. You cannot effectively reach a settlement that is effective and good for all parties (and saves as much money as possible for husband and wife) if you try to settle on an asset by asset basis.
Other Factors When Dividing Real Property in Arkansas
There are many factors to consider when dividing real property in an Arkansas divorce. If you have property issues, even if you are in total agreement on how to divide them, you should 100% seek legal advice. There may be things you’re not considering, or even more commonly, you know what you want to accomplish but you don’t know how to accomplish it. If you don’t do it right, you’ll have issues down the road which will cost more money and time than if you’d done it right in the first place.
Don’t Leave It Up To The Judge
It’s almost always in the best interests of the parties to work out the real property division. If a judge is forced to decide, he or she almost always orders the real property sold on the courthouse steps. This results in the property being sold at a huge loss, hurting both spouses. A divorce decree isn’t enough when dividing real property.
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