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Will the House Have to Be Sold if You're Divorcing?

Find out when you might need to say goodbye to your marital home.

Who Gets the House?

The “marital home” is the house you share with your current spouse and family. It can be the same house you lived in from before your marriage or a house you and your spouse purchased after the wedding. Who gets the house depends on where you live and if the house is joint property.

State law governs property ownership and asset division during a divorce. Your state will follow either community or equitable distribution property laws. For example, in a community property state, you and your spouse will split divorce assets in half. This could mean that you and your spouse are both entitled to 50% of the equity in the marital home. In an equitable distribution state, a judge will divide your property fairly—this doesn’t necessarily mean evenly or equally.

The date you acquired the house is an important piece of information in a divorce. Both in the community and equitable distribution states, a judge can’t award your separate property to your spouse. The property is usually designated as separate if it was a gift or inheritance or it was acquired before the marriage. Generally, spouses keep their own separate property in a divorce.

Can I Get the House Even If It’s Not My Separate Property?

You and your spouse can also reach your own divorce agreement dividing up marital assets, including the family home. However, if you leave matters up to a judge, the parent with custody of minor children will probably get to stay in the marital home.

A judge can award the marital home to one spouse as part of property distribution in your divorce. This assumes that the house qualifies as “marital” or “community” property and not one spouse’s separate property.

A court will look at several factors to decide who gets the house. These factors may include, but aren’t limited to the following:

  • each spouse’s financial circumstances
  • each spouse’s contributions to the marital home
  • each spouse’s age and physical and mental health
  • which parent has custody of the couple’s minor children
  • source of funds for the marital home
  • marital misconduct of either spouse
  • each spouse’s employability and job skills, and
  • the value of the marital home.

You and your spouse can also reach your own divorce agreement dividing up marital assets, including the family home. However, if you leave matters up to a judge, the parent with custody of minor children will probably get to stay in the marital home. This is because a home is seen as a source of stability for children embroiled in the midst of their parents’ divorce. Letting children stay in their childhood home also allows them to maintain the same friendships and attend the same school. One exception may be if neither spouse can afford to keep the home. In that case, a court may come up with a different solution.

Dividing Equity in the Marital Home

In most divorces, the marital home is a couple’s biggest asset. It’s also the center of family life and often serves as an anchor for families with minor children. If a judge determines that the marital home is one spouse’s separate property, the solution is simple: the spouse who owns it, gets it. It’s a lot more complicated when the family home is a marital asset.

Distributive Shares

A judge can award both spouses a share in the marital home. This means each spouse has rights to the value of the marital home. There are several ways to grant spouses their share of the marital home, such as:

  • requiring one spouse to pay for or “buy out” the other spouse’s share
  • awarding one spouse exclusive possession of the home for a limited period of time, and requiring the couple to sell the house by a certain date after that
  • requiring the couple to sell the house immediately and divide the proceeds as directed by the court, or
  • offsetting the value of the home by awarding additional marital assets to the other spouse.

Deferred Distribution

One way a court can divide a marital residence is by distributing the equity in your house on a future date, called a “deferred distribution.” For example, a judge can award you the marital home to live in until your youngest child turns 18, at which point the house must be sold. Deferred distributions are also common in cases where the housing market is soft and divorcing couples want to hold on to their home until the market picks up. As part of a deferred distribution award, a court will usually require one or both spouses to cover maintenance fees, taxes, mortgage payments, and home owner's insurance.

How Do I Prepare to Sell?

If you’re required to sell the marital home as part of your divorce, it’s not as scary as it sounds. In most cases, a judge will assign a certain real estate agent or you and your spouse can pick your own. Most couples are on the same page when it comes to selling a home because both spouses want to maximize their profits.

A listing agent can recommend any updates or strategies for selling. A divorce order will typically require couples to split the costs of updates to the residence. Once a home is under contract and sold, any proceeds must be split in accordance with the divorce order.

Questions for Your Attorney

  • Most of our net worth is tied up in our house, and I want to keep the home. Can I agree to take less alimony from my spouse to make things fair?
  • My spouse wants the house and I’m okay with it, but how do I get my name off the mortgage? I don’t trust that my spouse will make payments on time and I don’t want my credit affected.
  • I agreed to let my spouse stay in the house until the kids are older and we can sell the home then. However, I want to make sure my spouse pays for improvements and maintenance and keeps the home in good condition. How can I do that?

Santa Cruz County median price home plunged

by Patti Lyles

February home price median retreats to $380,000
by Patti Lyles

The median price for a single-family home in Santa Cruz County plunged in February to $380,000, the lowest since January 2000, prompting one agent to declare the market has bottomed out.

92 sales, with homes in Watsonville, the area hardest hit by foreclosures, accounting for a record 33 percent.

And 66 percent sold for less than $500,000, the highest percentage in years, according to Gangnes.

In Watsonville, banks sold foreclosed homes at discounts of 30 percent to 50 percent.

A few examples:

124 Grant St. sold for $166,000, down from $490,000 in 2004.

38 Lower Cutter Drive sold for $215,000, down from $420,000 in 2003.

518 E. Lake Ave. sold for $235,000, down from $395,000 in 2002.

Those are not condo prices; those are single-family homes.

"We've hit our bottom in South County in single family," said Dee Dee Vargas, president of the Watsonville Association of Realtors. "If you're waiting to see if prices might drop a bit, you might miss the boat. We're seeing multiple offers. I've got more buyers than properties right now."

With a market full of "distressed" properties, banks selling foreclosed homes and homeowners seeking bank approval for short sales, closing a sale is "almost a miracle," she added. "We get a lot of curve balls thrown at us."

It might be a lender that insists on reviewing an appraisal before authorizing a loan or one that shuts down before providing the promised funds.

Entry-level buyers are taking advantage of FHA loans, but some are discovering there's a catch. Distressed properties need repairs to meet FHA health and safety standards, but banks want to sell the home as is and the buyers are stretched to come up with the required down payment.

Some investors competing with first-time homebuyers.

That's driven by a change in Fannie Mae and Freddie Mac guidelines. The two mortgage-buying entities had restricted investors to four properties. New guidelines allow 10.

Clients qualified for an FHA loan but the bank that owned the house accepted an all-cash offer from an investor.

"With banks, cash is king,"

Tai Boutell of Santa Cruz Home Finance predicts that interest rates for mortgages, pushed artificially low -- at or below 5 percent -- could go up by mid-year to the low 6 percent range. Buyers who wait until then hoping for prices to fall will pay more, he said.

For example, payment on a $500,000 loan at 5 percent would be $2,684 a month; if the home price drops 10 percent in six months and interest rate rises to 6.5 percent, the payment would be $2,844 a month.

While the low-end market is brisk, high-end activity has nearly dried up.

Only four homes sold in February for more than $1 million.

Longtime appraiser Glenn Fuller reported 212 listings in that price range at the end of last week.

"That's a lot," he said.

He tallied only 11 pending sales, leaving about 19 months of inventory.

In 2007. buyers were snapping up $2 million homes around the county. Now they just aren't selling.

Very few people can qualify under the new standards, Fuller said, and the typical buyer of the high-end properties had money in the stock market but doesn't seem as rich since the market tanked.

 

How do vacation rentals work in Santa Cruz?

by Patti Lyles

Q. How do vacation rentals work in Santa Cruz?

A. First of all this is a function of specific rules (ordinances) in City of Capitola and the lack of any rules in the City of Santa Cruz, and in Santa Cruz County areas. 

 

As for the City of Capitola, there are strict ordinances that govern daily/weekly/vacation rentals. (That is any time period less than 1 month or 30 days.) The property must be zoned commercial and in the Village, Downtown to be rented in this manner. Also, there is a 10% hotel tax (otherwise known as room tax or transient tax) due at all times. Penalties for not paying this are extreme. 

 

Most is positive about vacation rentals. They are a vehicle to “have your cake and eat it too”.

You buy your Beach House, enjoy it when you want to (or when it’s not rented) and collect about four times the normal rent per month. A rule of thumb is vacation rentals get about the same income per week as you would get per month in the off-season. Of course, you must deduct cleaning, advertising, bookkeeping, maintenance, hotel tax, and any management charges. This total can range anywhere from 25%-45% of the price charged to the guest.

 

Another perk is the constant appreciation that Beach Properties in Santa Cruz County have enjoyed. Even in so-called down markets,  Beach Homes here have stayed strong since most are cash buyers that are not relying on large loans or high LTV’s (loan-to-value) and our limited product inventory.

Contact Patti@PattiLyles.com

http://www.santacruzrealestatehomes.com for more information about real estate or buying a vacation rental.

 

Once you leave Capitola, both north and south, you are in Santa Cruz County designation. These areas include Rio del Mar, Seacliff, Seascape, La Selva Beach, Manresa, and Pajaro to the south. To the north of Capitola, there is Opal Cliffs, Pleasure Point, Live Oak, and the Yacht Harbor. All of these areas have no restrictions except to pay the 10% Hotel Tax.

 

The City of Santa Cruz also has little or no restrictions on vacation rentals that I know of except the 10% Transient Tax due. Fortunately, this Hotel Tax goes to either the City or County areas where the property is located and into those coffers for use on roads and maintenance of that local infrastructure.  When choosing areas for your new beach home that you intend to rent, be sure to call one of the several local vacation rental management companies or a network of owners who want to manage their own. (You can call or email me for this list.) It is important that you ask which property areas are in most demand and exactly what amenities should the property have to get the most rent and be most desirable for vacation tenants.

 

In summary, the positive aspects of vacation rentals are the following: you have your own Beach House when you want it (maybe with a locked closet or room to keep your personal things on site); you enjoy the appreciation over the years; you off-set the expenses with great income; someone else (if you have a management company) takes care of the problems and maintenance; short-term rentals allow more owner control than long-term; you may need to use your assets for income gain; it’s good for the economy of Santa Cruz – tourism is our #1 business. People who rent vacation homes shop, eat, and are entertained in our little Paradise. Call or email questions

 

or comments regarding where to buy and how it works

 

1031 Exchange and TIC's: Common Questions

by Patti Lyles
1031 Exchange and TIC's: Common Questions
  • Q: What is a TIC?
    A:TIC is simply a form of concurrent real estate ownership.  TIC is an abbreviation for "Tenant in Common".  This form of ownership may be used when more than one person (or entity) owns a property. Some of the main characteristics of TIC ownership are:
    • Two or more people co-own a parcel of real estate without the right of survivorship.
    •  Each co-owner can choose who will inherit his/her ownership interest upon death. 
    • TIC owners own percentages in an undivided property rather than particular units or apartments, and their deeds show only their ownership percentages.
  • Q: What types of properties are owned as TIC's?
A: Any real property can be owned as a TIC.  The common types of real estate that we see owned as TIC are as follows:
  • Residential TIC's - Most typical in areas like San Francisco and New York City where several parties co-own a multi-unit property with each owner desiring exclusive use of a unit.  The exclusive use is derived from a separate Tenant in Common Agreement. 
  • Vacation TIC's - Vacation home buyers and resort developers use the TIC form of ownership instead of the traditional timeshare arrangement.
  • Commercial TIC's - Income property investors pooling resources to co-own large commercial or institutional grade real estate.
  • Q: What to be aware of with a residential TIC?
A: There are numerous considerations when acquiring a residential TIC, just a few to consider are:   
  • The exclusive use to a unit will only come from a well written TIC agreement.
  • Each co-owner can sell his/her interest at any time although the sale may be subject to right of first refusal by the other owners and/or buyer approval, as per the TIC agreement.
  • Many lenders will not provide individual loans for TIC interests, so group financing may be necessary.
  • Q: What are the possible pros and cons of a commercial TIC?
A: The pros and cons of each commercial TIC will be largely dependent on the uniqueness of the underlying real estate.  In general, some of the pros and cons of this type of investment include:
  • Pros
    • Allows individual investor access to better/larger properties
    • Professional Property Management
    • Economies of scale
    • Predictable and stable cash flow
    • Diverse tenant mix
    • Non Recourse Financing
  • Cons
    • Liquidity, no established secondary market
    • Group decision making
    • No ability to individually pull money out (refinance)
  • Q: Can a TIC be part of a 1031 Exchange?
    A: Provided the real estate is used for business or investment purposes real estate owned as a TIC can qualify for a 1031 Exchange.
  • Q: If I sell a TIC and 1031 Exchange, do I have to buy a TIC?
    A: No. In a 1031 Exchange, property that is co-owned with one or more individuals can be sold and the replacement property can be individually owned.

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Photo of Patti Lyles Real Estate
Patti Lyles
Century 21 Showcase, REALTORS
P.O. Box 67275
Scotts Valley CA 95067
831-335-2100

DRE #01385517