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How does real estate get divided in a divorce?

On Behalf of | Dec 18, 2023 | Asset Division, Divorce

As you start the divorce process in North Carolina, you are likely to have plenty of questions about property division, which is one of the most complex pieces of divorce.

You may be especially concerned if you own real estate. Many people own a home with their spouse and some couples own other pieces of real estate, such as vacation homes or rental properties.

Marital and separate property

Before dividing real estate according to North Carolina law, all assets and debts must be classified as marital or separate property. Marital property is divided in a divorce. Any separate property remains owned separately.

Marital property is property that was purchased during the marriage. Property that was purchased by one spouse before the marriage is separate property but can become marital property if it mixes with marital funds.

For example, if you bought a home before you were married, but after you were married the mortgage on the home was paid with funds from a joint bank account, the home is now likely considered a piece of marital property.

Equitable distribution

North Carolina courts refer to property division as equitable distribution. Their goal is to divide marital property in an equitable, or fair, manner. The courts generally assume that an even, or 50/50 split, is fair.

However, there are times that an equal division would not be fair, so the court may award an unequal division of marital property.

When it comes to real estate, many times both spouses want to keep the marital home. Since a court cannot award it to both spouses, to achieve an equitable outcome, the home is awarded to one spouse, but that spouse must buy out the other spouse’s portion.

Assume that your marital home is worth $500,000 and there is no mortgage on it and you have no other marital assets to be divided. If you are awarded the marital home, you just received a $500,000 asset, while your spouse has received nothing.

To achieve an equitable division, the court could order that you refinance the home, taking out a mortgage of $250,000 that gets paid to your spouse. You then both leave the marriage with $250,000. As part of the refinancing, you will also likely need to remove your spouse’s name from the home.

How does a court choose who gets the house?

The court examines several different factors when determining which spouse receives the marital home. The spouse receiving it must be able to afford the costs.

When children are involved, the spouse who has primary custody of the children sometimes receives the marital home because the court does not want to move the children away from their primary residence.

You may worry that if you move out of the marital home you have no chance of it being awarded to you. This is not necessarily true.

Sometimes people leave their homes for valid reasons, such as to escape an abusive situation. The home is still marital property and you have an equal right to it. However, which spouse is still living in the home will be a factor the court examines.

Other types of real estate

If you own other real estate besides a marital home, the same general equitable distribution rules apply. One spouse may receive the marital residence, while the other spouse receives the vacation home, provided they are of relatively equal value.

You might own real estate that is separate property. This may be a situation where the court would award an unequal division of marital property to obtain a fair outcome. Your spouse may receive the marital home and not be required to pay you a portion of the equity since you own a piece of separate property.