Q. Our daughter and son-in-law are getting a divorce. They bought a house nine years ago for $42,000, put down $9,000 and obtained a 30-year mortgage in the amount of $33,000. The house is now worth about $80,000, and the mortgage is down to about $30,000. My daughter wants to buy out her husband, pay him his share and live there with their daughter. What is our son-in-law's fair share of the property?
Our daughter has been paying the mortgage payments for about two months now, and is paying all of the expenses of running a house.
A. Your daughter should consult an attorney knowledgeable about domestic relations matters. There are significant legal and tax questions that should be explored, and I cannot give a categoric answer for your particular case.
However, some general observations can be made.
The equity in the house is now $50,000. As I understand it, in your daughter's situation, the mortgage is about $30,000 and the house is worth $80,000.
Presumably, if he has been living in the house and paying the mortgage (or at least his share) for the last nine years, he probably is entitled to half of the value of the house -- or about $25,000.
If, on the other hand, your daughter has been making payments for a longer period of time, then, in my opinion, your daughter would be entitled to offset those payments against her husband's equity.
Also, there is another deduction (set off) from the amount of the equity -- namely the cost of selling the property. For example, if your daughter has to sell the property a few years down the road, she may want to use the services of a real estate broker.
That broker will charge a commission, and it is unfair to have your daughter absorb that entire cost by herself. It is fair to deduct from her husband's equity some dollar figure representing the sales commission and charges. Additionally, because most sellers now usually end up paying at least a point to assist their buyer in obtaining a mortgage loan, the cost of this potential point also should be considered in determining her husband's fair share of the property.
As I indicated earlier, however, these are some very brief general observations. Usually, the sale of the house from one party to another is but a part of an overall settlement between the divorcing husband and wife. There is always give and take in this process, and other items -- such as alimony, child support, medical and dental assistance -- are plugged into a final negotiated settlement.
Thus, your daughter may be interested in giving up any claims to alimony in return for giving her husband a smaller portion of equity. It also may make sense for both husband and wife to keep the property after their divorce for a few more years, under a carefully drafted partnership agreement. This way, they both could benefit from any appreciation that the property may bring in the future. Needless to say, this kind of arrangement can be successful only if the divorcing parties remain on a more or less friendly basis.
In the final analysis, your daughter -- with the advice of a competent attorney -- should negotiate an overall property and marital settlement with her husband. My definition of a settlement is where both parties walk away unhappy, but walk away.
In my opinion, it makes absolutely no sense to have these matters resolved by a judge after an expensive, time-consuming trial. But, unfortunately, not all divorces can be resolved amicably.