On behalf of The Marks Law Firm, L.L.C. posted in Divorce on Thursday, May 16, 2013
Clients often ask how the court will handle the marital residence. Will the court award it to one party over the other? Will it order it sold, and can it do that? How will each party receive their equity in the house?
Courts do not follow a hard and fast rule regarding the marital residence. Generally, particularly if children are involved, if one party can assume the mortgage and continue residing in the house, the court will structure its award in that manner, though it must also assure the other spouse receives the appropriate equity share in the value of the house. When neither party can afford to maintain the residence, the court will usually order the sale of the house and an equal division of the proceeds between the parties.
This week, the Eastern District of the Missouri Court of Appeals addressed a provision in a decree ordering the sale of the marital residence. The provision stated the parties should place the home on the market at a staring price of $405,000, and reduce the price by $5,000 every three months until the house sells. As you can see, the court placed no time limit on selling the house, and this proved to be a big problem. The Eastern District held that for a sale of the marital residence to be valid, the trial court must place a time limit for the sale. The Eastern District noted that without a specific sell-by date, the party that remains in the house until sale has an incentive to hold out indefinitely because the other party continues to contribute to paying the mortgage.
So, if you have a situation where you must sell the marital residence, you must have a definite sell-by date, which means you also must mutually agree to a value to obtain by the sell-by date. For example, it may be that both parties want more out of the house than the market will bear by the sell-by date. In that situation, the parties will be forced to lower the price further to secure a sale, but doing so will impact the net equity in the house, which in turn can impact the overall fairness of the property settlement in the decree. It would be the best practice to protect yourself against taking the greater hit on the house – remember, the court could always order the home auctioned on the courthouse steps!
If you have questions about the sale of the marital residence or divorce, contact us – we can help.