Many people facing the tough decision about the family home find themselves being pulled by their head and pulled by the heart, but sharp pencil work should be done before making a decision. That so-called American Dream of homeownership can become a waking nightmare for a divorced spouse who fails to throw a cold eye on arrangement before signing the divorced settlement.
A divorce upends a lot of what makes a home attractive — particularly that warm and toasty feeling of the nest, a special place where people love and nurture one another and make shared memories. The home, post divorce, is an empty box on a piece of land.
Very often, courts award mothers the marital homestead on the theory that the children endure less disruption staying in the place they know. This may be true, but after a time, the mother discovers that the routine leaves her house rich and cash poor. Now she faces the logistics of selling the house on her own — the commission to the real estate agent and spiffying up the property to get it ready.
And this ignores the grim reality of a very depressed housing market. The woman who took the house as part of a divorce settlement in 2007 now faces a far worse housing market, and the much of the appreciation of housing during the boom vaporized in the collapse of the market.
And a single householder who did not take a haircut in the collapse of the market now faces paying capital gains on the first dollar above $250,000 when she could have taken the $500,000 capital gains exclusion if she and her partner had sold the house before the divorce.
This house equation is further complicated by the cost of taking over a mortgage (or getting new one) and the routine expenses associated with ownership, including maintenance and taxes.