How Is Real Estate, Community Property Divided In Divorce?
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How Is Real Estate, Community Property Divided In Divorce?
In Arizona, real property acquired during a marriage is typically considered community property and will be equitably divided during divorce. This includes the marital primary residence, vacation homes, investment properties, raw land, and real property acquired in other states and foreign countries. As always, there are exceptions under which real property may be deemed sole and separate property if the property was acquired:
1) Before the marriage
2) As a gift or inheritance
3) With sole and separate funds
4) Excluded in a premarital agreement
5) After a legal separation or service of a divorce petition
After you account for all joint property, the collective real estate values are validated through formal appraisals or broker opinions of value depending on the amount at stake. Each property has a vested title, which will indicate how each property is legally held: sole and separate, community property, community property with right of survivorship, joint tenancy or tenants in common. In addition, each property may have deeds of trust, with mortgage debt balances owed to third parties. Entry of a divorce decree does not relieve the parties of jointly held real property debts. To the contrary, both parties remain jointly and severally liable on the real property debt until the debt is refinanced by the spouse taking the property, or when the property is sold.
To determine your real estate asset values, calculate the fair market value less any mortgages and other liens recorded against the property. In today’s still recovering real estate market, some properties are under water meaning the real estate has negative equity. Free online resources such as www.trulia.com and www.zillow.com are good starting points for establishing a rough concept of today’s market value.
After you have a sense on valuations, talk with your attorney about how you perceive a fair way to divide the real estate in your case. One party may prefer to keep the marital home, whereas the other is willing to relocate upon payment for their ‘half’ of the value of the marital home. Some couples lack sufficient cash to allow either spouse to stay in the marital home which often requires a sale of the marital home and sharing of all cash proceeds after mortgages are paid off. One of the most important factors determining whether a spouse can ‘keep the house’—is if that remaining spouse can independently refinance the home in his or her own name so that the departing spouse is protected from any future mortgage defaults. If the “keep the house” spouse cannot qualify for a new mortgage, the house will likely have to be sold at market value with net proceeds equally divided after commissions and costs are paid.
Alternatively, when couples own two or more properties, they may decide to distribute their real estate “in kind” by having each spouse keep some of the properties. Ideally, the real estate should be refinanced and put in each individual’s name in order to release the other spouse from the prior mortgages. If a spouse defaults on a joint mortgage obligation, a lender can foreclose on the property and attack the credit of both parties who were previously married. It’s important to include a set time deadline in the Divorce Decree for refinance which allows the other party to enforce the Decree before the court should the other party fail to refinance as promised.
In conclusion, both husband and wife should consult individually with an attorney to discuss the marital home, investment properties, titles, secured debt, and equity in their various real estate holdings before deciding how best to advance the case in a marital dissolution proceeding.
Canterbury Law Group can help you navigate complex real estate issues in divorce. The firm has an extensive background in real estate law and members of the firm serve as Real Estate Expert Witnesses and are active members of the Forensic Expert Witness Association.
The firm’s real estate experience is so deep that other lawyers hire the firm to consult on real estate matters in their cases. Attoney Craig Cherney has testified at depositions and at trial regarding a host of complex real estate issues. He has co-managed a large private equity real estate fund overseeing hundreds of millions in equity. Mr. Cherney will be armed and ready to resolve your family’s real estate holdings in a way that achieves the highest recovery, at the lowest expense, as he advances your matter toward final decree.
Contact us today to schedule your initial case review. We’re here to help!