This is the second installment in our two-part blog series discussing the division of interest in a family residence during divorce in light of the recent rebound of the real estate market. For Part I click Here.
The process of determining the value of the home as well as the appropriate allocation of value to each marital partner involves a three-part process. First, the fair market value of the residence must be determined. This is usually accomplished by using a real estate appraisal or realtor’s market analysis. There are less common situations where a property tax valuation also may be relevant. Once the value of the property has been determined, the equity in the property may be calculated by deducting encumbrances like the mortgage, secured line of equity, costs of sale (usually 4-7 percent in commission) and any necessary improvements to accomplish a sale.
The final step in calculating the interest of each party in the equity of the family residence involves allocating the appropriate amount of appreciation that is the result of separate property contributions from community property contributions. While sometimes a financial expert is a valuable resource for conducting such an analysis, our experienced New Mexico Divorce Lawyers counsel our clients regarding the cost and potential benefit of an expert in this situation. Depending on the amount of equity in the property, the cost of an expert may be justified.
Once the net equity of each party is determined, the parties have a number of options in terms of how to distribute this equity:
• One spouse refinances the home and buys out the interest of one’s spouse.
• The spouse who surrenders his/her interest in the home is compensated with other assets, such as a spouse waiving his or her community property interest in a spouse’s retirement.
• The home is sold and the proceeds divided between the parties based on their community and separate property interests in the residence.
This process involves a fair number of “moving parts,” which may result in errors and compromise the fairness of the property distribution. The selection of a realtor or forensic accountant sympathetic to your spouse could result in a biased outcome. The failure to fully account for tax implications of a proposed distribution of equity in the home could also skew the fairness of the property division. Our experienced New Mexico Community Property Division Attorneys carefully guide our clients through the process of identifying, valuing and dividing community and separate property assets so that we can protect our clients’ financial interests and provide a firm financial foundation following a divorce judgment.
The above information is provided to illustrate general principles of law and should not be interpreted as a specific legal opinion on an individual case. You should contact experienced legal counsel to get specific legal advice that is based upon your specific circumstances.
If you have questions about divorce involving the division of community property during a New Mexico marital dissolution, the Jay Goodman & Associates offers a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your options. Call us today to schedule your free consultation at (505) 9898-117 to learn about your rights and options.
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