A marital home is typically considered marital property and must be divided in divorce like the other assets which are marital in nature. That may be a simple process if both spouses are willing to sell the house to a third party and split the sales proceeds between them or one buys out the interests of the other in the home. If they don’t agree to either of these options, the matter becomes more complicated and the court may need to intervene to decide what happens to the house. One method available to determine ownership and the sale price of the marital home is to have a bidding process open to both spouses and third parties.
What Happens If Only One Spouse Wants the Marital Home?
When one spouse wants to buy out the other and that spouse agrees, they must decide on the sale price. Often, that can result in disputes over the valuation. In that event, the court will order an appraisal of the home. If the case is not in court, both sides may agree on a real estate appraiser or get their own appraisal. If there are two appraisals which vary significantly and the parties are unwilling to compromise, the matter may go to a judge who will usually order the sale of the house based upon the idea that the true value of the home is what someone is willing to pay for it.
How Does the Court Decide Ownership and Sale Price When Both Spouses Want the House?
If both parties want the home and refuse to settle on their own, the court will order the sale of the house. Both spouses could then have an option to bid on the house at auction if the court order provides for it and they want it. Bidding is started by finding a non-party bidder to make an offer on the marital home that he or she can show they can pay. The highest bidder then gets the house and the bid price is set as the value of the house for the purposes of dividing the couple’s assets.
Importantly, the winning bid must come from a qualified bidder, meaning someone who can afford to pay the bid he or she placed to buy the house. The buyer must prove he or she can purchase in cash or has a mortgage pre-approval letter from a licensed mortgage broker. Without this proof, the bid is invalid.
This issue came up in a recent client matter. The client’s spouse had the highest bid. However, his bank statements were suspicious because they did not show the account holder’s name and the date of the balance in the account. Further, the mortgage pre-approval letter was from an unlicensed broker. While the issue is currently being litigated, it is likely that the court will find that the spouse with the problem bank statements and mortgage pre-approval letter is not a qualified bidder and the qualified non-party bidder’s bid would be accepted for purposes of determining the other spouse’s price to buy the marital home.
In most cases, it is best for parties to settle issues like this on their own. Going to court means additional legal fees and court costs. Further, a judicial sale can have tax consequences.
If you are considering divorce, contact us to discuss how we can help you achieve a positive result in your case.