A House Divided: Who Gets the Family Home in a Maryland Divorce?
When you decide to get a divorce in Maryland, there are a lot of issues that need to be dealt with. Outside of dealing with child custody and other family dynamics involving minor children, most of the issues involved in dissolving a marriage are financial. Essentially, you must reach agreement with your spouse on who gets what in a divorce settlement.
However, while these decisions may just be about the numbers, it is rare for divorcing couples to be able to approach the decisions that must be made without an influx of emotions. One of the most emotionally-charged decisions that must be made involves deciding the fate of the family home.
Who Gets the House in a Divorce Settlement in Maryland?
The family home is defined as the principal residence of the parties in a divorce case. Under Maryland Family Law Section 8-201, the family home:
- Must have been used as the principal residence of the parties when they lived together.
- Must be owned or leased by one, or both, of the parties at the time of the divorce proceedings.
- Must be used, or will be used, as the principal residence by one or both of the parties and at least one child.
- (Note: for the sake of consistency, this article refers to the term “family home.” However, if the divorcing couple have no minor children, a more appropriate term would be “marital home.”)
- Does not include property acquired before the marriage or by inheritance or gift from a third party, nor can it be property that has been excluded by a valid agreement.
The family home is more than four walls and a roof. For most married couples, it’s the place where they’ve built a life with their spouse, and often raised a family. There are typically many memories, and a lot of security, wrapped up in the family home. So, when a marriage falls apart and it comes time to decide who gets the house in a divorce settlement, it is understandable that many people find it difficult to approach this decision 100% rationally. However, allowing emotions to cloud judgement can have long term, lasting consequences.
But, before we get into who gets what in a divorce settlement, let’s establish a basic understanding of marital property division laws in Maryland.
How is Property Divided in a Divorce in Maryland?
Generally speaking, marital property refers to all of the “stuff” that is accumulated during the length of the marriage — from the day you say “I do” to the day the judge signs the divorce decree. This can include, but is not limited to:
- Retirement accounts & pensions
- Bank accounts & investments
- Life insurance policies
- Real estate (including the family home)
Marital property essentially belongs to the marriage. Legally speaking, the title to these possessions doesn’t really matter. So, for instance, if the husband has the car put in his name only, but it was purchased during the marriage, it is still legally considered marital property. We have an in-depth blog about marital property to help you understand this topic better.
Typically, married couples own their home together and both spouses’ names are on the Deed. Most of the time, they hold title as what is called “tenants by the entirety” — a special, very protective status of title available only to married couples. However, as mentioned above, regardless of how the property is titled, real estate that was purchased during the marriage is considered marital property.
The Importance of Reaching an Agreement
In almost all cases involving separation and divorce, it is in the best interest of both parties to reach agreement about the division of assets in divorce, either between themselves or with the help of an experienced divorce lawyer and/or mediator, rather than relying on the courts to resolve their issues.
The earlier in the divorce process that the divorcing spouses reach agreement about what is going to happen to the family home, the better off they will be. Specifically, the parties must make the following decisions:
- Will the property be sold, and if so, when?
- Which spouse will stay in the home until the property is sold?
- Who will pay for the mortgage, maintenance costs, and other expenses associated with the home until it is sold?
- If one spouse wants to keep the home as part of the divorce settlement, what arrangements will be made to do so (refinancing, buying the other party out, etc.)?
Incident to divorce, if the parties can’t come to an agreement about what will happen to the family home, then the court will make the decision for them. In Maryland, the custodial parent of a minor child is entitled to request “temporary use and possession” of the family home, which will allow that parent to stay in the home for up to three years following the date of divorce, in order to maintain a stable environment for the child.
However, putting aside issues relating to child custody, or if the divorcing couple has no minor children in common, failing to reach agreement will typically result in a court-ordered sale of the home. Similar to a foreclosure sale, during this process the Court will appoint a local lawyer to serve as a trustee, charged with overseeing the sale of the property. In most cases, the trustee will engage the services of a real estate agent to market and sell the house. However, in certain instances, the property will be sold at auction.
Regardless of the specific terms of the sale, court ordered sales of real estate are most certainly not in the best interest of the divorcing parties — financially or emotionally. Aside from simply being upsetting for the family, a court ordered sale is also expensive. Not only will the parties be responsible for paying real estate commissions, they must also pay a commission to the trustee. To compound the issue, houses sold by court ordered sale often produce a lower sale price than properties that are sold on the owners’ own terms.
FAQs: Divorce & The Family Home
In almost every scenario imaginable, it is mutually beneficial for the divorcing parties to work together to reach agreement about what will happen to the family home. The earlier in the divorce process that this takes place, the easier (and less expensive) the divorce process will ultimately be.
However, while nearly any agreement is better than no agreement at all, there are certain considerations that should be taken into account during the decision making process to avoid undesirable consequences down the road. Below, experienced Columbia, MD divorce lawyer Fred L. Coover partners up with some local real estate and mortgage lending experts to address some of the most common scenarios that couples face when deciding what to do with the family home incident to divorce.
Q: “In Maryland, is co-owning a house after divorce a smart idea?”
A: If you ask multiple divorce lawyers and real estate professionals this same question, you are bound to get varying answers due to the fact that it is, to some degree, a matter of opinion. However, divorce attorney Fred L. Coover’s perspective on the issue is clear: co-owning a house after divorce is rarely, if ever, a good idea. In his opinion, the reason for this is simple: “In all likelihood, the factors that prevented you from having a successful partnership in marriage will also prevent you from having a successful partnership as co-owners of real estate moving forward.”
Regardless of market conditions or other external factors, Mr. Coover almost always advises his clients to “bite the bullet” and sell (or refinance) jointly held real estate prior to, or simultaneously with, divorce proceedings. In addition to the fact that co-owning real estate is a business transaction, and divorced couples rarely make good business partners, there are also significant financial risks to co-owning real estate after the divorce is final. For more information about this, please check out our article on the matter.
Q: “In our divorce agreement, my ex got to keep the house with the obligation to refinance within 18 months to remove my name from the mortgage. She now tells me that the house is worth less than the unpaid balance and that she cannot qualify for a refi. What should we do?”
A: According to Jackie Daley, Broker/Owner of Jackie Daley Realty in Columbia, MD, your best option in this situation is most likely a short sale. “Short sales are an excellent tool if your home cannot be sold for enough to satisfy the mortgage balance as well as all fees related to selling, including real estate commissions and closing costs. Short sales are a misunderstood option surrounded by misinformation and mythology. To learn more about your options related to short sales, check out this article.
Q: “My divorce agreement states that I am to keep the house, and my soon-to-be ex will be moving out. Can I refinance this loan into my own name prior to my divorce being finalized?”
According to Brian Morley, Senior Vice President of Fulton Mortgage Company in Columbia, MD: “While you should always seek the counsel of your divorce attorney before acting. In this situation, refinancing is typically the most prudent course of action. If you wait,
your separation and/or divorce may lead to alimony and/or child support, which could prevent you from qualifying to refinance.”
Q: “My ex kept the house in our divorce. Although s/he pays the mortgage, I’m still listed as a borrower on the loan. If I go to apply for a new loan in the future, will the old mortgage be counted as a debt against me?”
A: Maybe! “The only way that a mortgage lender will ‘ignore’ your previous mortgage is if you can prove that your ex is legally and solely responsible for paying back the loan,” Morley says. “If the loan program allows for it, you may be asked to provide a copy of your separation agreement/court order/divorcee decree, as well as documentation showing that your ex has made 12 consecutive mortgage payments from their own individual account.”
Q: “What if my ex has refinanced the loan already, but I have not been removed from the title of the property?”
A: “The new mortgage that your ex-spouse has obtained is his or her debt, and is not counted against you,” Brian Morley explains. “However, as an owner of the home, the taxes and insurance associated with that property are counted as a debt against you in your qualifying.”
Q: “I am to receive alimony and/or child support as a result of my divorce. At what point can I use this income to qualify for a loan?”
A. It depends on the loan product, but generally speaking, once three months of these sources of income are received pursuant to an agreement, it is considered an acceptable source of income,” says Morley. “You will need to provide proof of consistent receipt of said income, as well as the agreement or order for payment.”
Q: “When we divorced, my wife got use and possession of our family home for 18 months before we were obligated to sell. Her lawyer ended up suing her for his legal fees and got a judgment against her. The judgment attached as a lien against the house and needs to be paid in full before we can sell the property. My wife just told me she plans to file bankruptcy. Will her filing bankruptcy after divorce impact my interest in our jointly-held former marital home?”
A: According to experienced Baltimore, MD bankruptcy attorney Ron Drescher of Drescher & Associates, P.A., “Your wife did you (and herself) a terrible disservice by waiting until after the divorce to file bankruptcy.” For more information on what could have been done to prevent this situation, as well as Ron’s professional advice for the best course of action moving forward, read our article on the matter.
Q: Our divorce agreement requires that our family home be sold. My ex believes the proposed listing price is too low and is refusing to sign the listing. Is there anything that our Realtor or I can do to move the deal along?
A: Unfortunately, this scenario is common in real estate transactions incident to divorce. Many times, one (or both) of the former spouses will find it difficult to get past the emotions of the divorce and focus on making a logical business decision regarding the sale of their former family home. Luckily, Marty Welsh, professional REALTOR® with the Bob Lucido Team of Keller Williams Integrity in Ellicott City, MD has some suggestions to make this stressful process easier on everyone involved:
Hire an appraiser to do an independent evaluation of the home. This will provide the specific comps and analysis for both spouses to see, allowing them to collectively decide upon a price based on facts, not emotions.
According to Marty Welsh, in order to maximize the proceeds from the sale of the property, the owners should “hire an experienced Realtor with a strong sales record in their local community, who is also a good communicator seasoned in handling divorce sales. The Realtor they choose should provide an in-depth property evaluation and list price recommendation, along with the resources to have your home professionally staged, photographed & videoed to ensure the property is presented to potential buyers in the best possible light. It is important to make sure your Realtor not only lists the property in the MLS, but also markets the home through open houses, print and video outlets, as well as online/social media platforms such as the Realtor.com, Zillow, Trulia, Facebook, etc.”
“Currently, in the Baltimore/Washington real estate market, there is an inventory shortage — meaning that there are more buyers than homes available,” explains Welsh. “If you do the things mentioned above, and the home is competitively priced and shows well, you should receive multiple offers in today’s market .
Lastly, Welsh says, “Don’t take the first offer you get! Give the home at least one weekend on the market with a reputable Broker and Realtor representing your interests, negotiating terms on your behalf, and getting the deal to the settlement table.”
A big thank you to our panel of local experts for contributing to this article by sharing their professional experience and knowledge relating to divorce, bankruptcy, mortgage lending and real estate.
Disclaimer: The information in this blog post is provided for general educational & informational purposes only. It is not intended to convey legal advice or serve as a substitute for legal counsel on any subject matter.