The most valuable asset that many married couples in Colorado have is their home. In some situations, a divorcing couple decides it’s in their best interest for one spouse to buy out the other spouse’s share in the home. Different methods exist to buy out a spouse, but determining the property’s value is the first step. Then, negotiations can begin.
Determining the Value of the Marital Home
Under Colorado’s equitable distribution laws, all property purchased during the marriage is generally considered marital property and subject to division during the divorce. If you and your spouse purchased the property during your marriage, it may be considered marital property, so you may need to resolve how to handle it so the court does not simply order it to be sold and the proceeds split between you.
Various methods exist to determine the value of real estate, including:
- Asking a real estate agent what they would list the property for if you were going to sell, taking into account recent sale prices for similar homes in the same area
- Hiring a professional appraiser who can inspect the property and give a professional opinion about the value of the property
- Asking a judge to determine the value of the property
Once you and your spouse agree on the property’s value, you can start figuring out their interest in it. In many situations, your spouse may own 50% of the home. However, you could agree that one spouse has a larger share in the property. If one of you purchased the property before your marriage, the property could be considered separate property, but its increased value may be considered marital property.
Ultimately, you will want to calculate the equity in the home, which is its value minus the remaining mortgage or other debts on the property. This will give a better sense if your spouse is owed $10,000, $100,000, or more for their share of the property.
Ways to Buy Out a Spouse
There are two general methods that spouses use to buy out another spouse’s share in property: trading other property or refinancing the property.
Trading Your Property
With a trade of property, you agree to give the other spouse other marital property in exchange for their portion of the equity.
For example, you might assign a retirement account to them, give them cash from your bank account, or provide spousal support for a certain period of time. Your spouse then removes their name from the title. Keep in mind that the other spouse’s name would still be on the mortgage, so if the spouse buying them out defaults on the loan, they can face consequences.
Refinancing the Property
Another option is for a spouse to refinance the property. Under this option, the spouse buying out the other spouse takes out a new loan to purchase the existing mortgage. They may be able to secure enough funds during this transaction to pay the other spouse for their equity. The other spouse is no longer on the mortgage and has no ownership interest in the property.
Get Legal Help for Your House Buyout Situation
It is best to work with an experienced lawyer when making decisions that could impact your ownership rights or financial interests. The Boulder divorce lawyers at Stahly Mehrtens Miner LLC are leaders in Colorado family law. We have extensive experience negotiating fair property settlements for our clients. Call (855) 963-4968 to arrange a confidential consultation to discuss your situation.