The house is one of the most difficult assets to deal with in a divorce. People do not get emotional about shares of Apple or GE but ask them about the house and they have definite and usually emotional responses.
Most time the house needs to be sold as it is typically the largest asset and one party may not have the funds to buy the other out of their equity interest in the home. Before you make any decisions there are a few things to think about.
What does your home cost to own and operate? You must, must, must understand the costs of running your home. Do not make any decisions before you do.
List out the annual cost of the mortgage, gas/oil, electricity, water, (call the utilities to get an annual number if you do not have access to past bills) real estate taxes, property insurance, service contracts such as lawn care, snow removal and furnace maintenance, house cleaning and home maintenance costs. Take a look at how these costs have increased over the past few years. Add everything up and see what it is on a monthly basis.
Also really look at the physical condition of the house and see what large costs might be coming at you in the next few years. Will the roof need to be replaced or the driveway repaved? Are the tiles falling off the wall in the bathroom or is the dishwasher leaking? Look at your current house as if it was a new house you were buying. Can you afford to pay for the needed repairs? Is the house properly valued for buyout price purposes?
If the money works for you to buy out the other party there are tax considerations to think about. As an individual you have a tax free capital gain of $250,000 on the sale of your home. If you sell the house jointly you each get $250,000. So if you buy out your spouse using pension assets, for example, and then sell the house a few years later and have a capital gain of $500,000, you will be taxed on $250,000 of that gain. This could result in a large tax liability. So the asset you thought you were getting may not be the same as getting cash or a stock portfolio.
If your real reason to hold on to the house is for your children to finish school then it may be wiser to negotiate the timing of the sale. You can have your lawyer draft language into your property settlement agreement to defer the sale until 3 months after your child finishes school. Even if that is 2 years from now the home will be sold as a joint asset and the tax burden on the sale will be shared, not assumed by one party.
Selling your home is also very stressful for everyone so if you have to sell, consider the timing. Keep your children in mind as you move. Moving over the summer is the best for school purposes and will take pressure off them. Also if they have to switch schools it will be easier to do that in September.
As always, I am a telephone call away if you have any questions. Also if you have a question post it as a reply to the blog and I will respond.