Divorce

Dividing the Family Home: Sell, Buyout, or Co-Ownership After Divorce

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Key Takeaways

For many divorcing couples, the family home is the most emotionally charged and financially significant asset they own. It’s not just a roof and four walls; it may be where children were raised, where major life milestones took place, and where financial resources were heavily invested. Dividing the family home after divorce can be one of the most difficult and consequential steps in the process.

In California, the question of “who gets the house” is shaped by community property laws, but the outcome isn’t always as simple as splitting everything down the middle. The decision involves legal rules, financial realities, and, often, deep personal attachments. Understanding your options—whether selling, buying out your spouse, or, in rare cases, continuing to co-own—can help you approach this decision with clarity.

dividing the family home after divorce

The Basics of Property Division in California

California follows community property law, which generally means that all assets acquired during the marriage are considered jointly owned and should be divided equally. Dividing the family home after divorce typically follows this rule, especially for homes purchased during the marriage. If one spouse bought the house before the marriage but both contributed to mortgage payments or improvements, the situation becomes more complicated. In those cases, California courts often apply what’s known as the Moore/Marsden formula to determine how much of the home’s value belongs to the community versus the spouse who originally owned it.

Courts also weigh practical considerations, such as the presence of children. For example, a judge may be more inclined to award temporary use of the home to the parent with primary custody to provide stability, though this doesn’t automatically grant full ownership rights.

Property division also takes into account debts, retirement accounts, and other assets, not just real estate. This means the house might be offset against other property or investments to reach an equal division.

Accurately Valuing the Family Home

Before deciding what to do with the house, both parties need a clear sense of what it’s worth. Real estate appraisals are the standard method. A professional appraiser will consider:

  • Comparable sales in the neighborhood
  • The condition and age of the home
  • Renovations or improvements that add value
  • Local market trends

This step is crucial because disagreements about value can derail negotiations. Imagine a couple in Walnut Creek disputing whether their house is worth $1.2 million or $1.4 million. That $200,000 difference could determine who can afford a buyout, or whether selling is the only realistic option. And if the couple can’t reach an agreement, the court will rely on appraisals or expert testimony to establish the home’s fair market value.

Option 1: Selling the Marital Home

dividing the family home after divorce

Selling the home is often the cleanest solution. Once the property is sold, the mortgage is paid off, and the proceeds are split according to the settlement. This avoids ongoing entanglement and provides both spouses with liquidity to start fresh.

However, timing matters. If the real estate market is slow, selling may mean walking away with less equity than expected. There are also tax considerations: under IRS rules, a married couple can exclude up to $500,000 in capital gains when selling a primary residence, but that exclusion drops to $250,000 per individual after divorce. Planning the sale before finalizing the divorce could help maximize tax benefits.

In California, another factor to keep in mind is property taxes. If one spouse keeps the home instead of selling, the county may reassess its taxable value, potentially raising annual property taxes under Proposition 13. Selling avoids that issue since the property changes ownership entirely.

Your home is more than just property—it’s part of your life story.

We’ll guide you through every option, from selling to buyouts, so you can make the right decision for your future.

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Option 2: The Divorce House Buyout Process

If one spouse wants to keep the home, a buyout is the common route. A buyout means one spouse purchases the other’s share of the equity, either through refinancing, taking on new debt, or offsetting the value with other marital assets (such as retirement accounts).

Example:
If the house is valued at $800,000 with a $300,000 mortgage, the equity is $500,000. Each spouse would typically be entitled to $250,000. If one wants to keep the home, they’d need to refinance into their own name and pay the other spouse $250,000 (through cash, assets, or a loan).

In cases where one spouse owned the home before marriage, California courts may apply the Moore/Marsden formula to determine how much of the home’s appreciation or equity is considered community property versus separate property. This can affect the buyout amount.

Financing the Buyout
Most often, the spouse retaining the house refinances the mortgage in their name. This can be tricky—qualifying for a mortgage on a single income can be challenging. Alternatives include:

  • A home equity line of credit
  • Trading other assets in the settlement
  • Extended payment plans (though courts don’t always favor these)

One of the main advantages of a buyout is stability, allowing children to remain in the home, and one spouse avoids uprooting their life. But it can also be financially straining, especially in California’s high-cost housing market.

Option 3: Co-Owning After Divorce

dividing the family home after divorce

Technically, former spouses can continue to co-own the home after divorce, though this path is uncommon. It usually arises when neither party can afford to buy the other out, or selling would be financially disadvantageous due to market conditions or tax timing.

Parents sometimes agree to co-own temporarily to maintain stability for their children. In this arrangement, both remain on the mortgage and title, and they share expenses like property taxes, insurance, and maintenance.

Co-ownership requires a clear, written agreement to avoid future conflict. That agreement should spell out:

  • Who is responsible for the mortgage and upkeep
  • How major repair costs will be divided
  • A timeline or triggering event for selling the home (such as children finishing high school)

While it can work in limited circumstances, most family law attorneys caution that co-owning keeps former spouses financially and legally tied together. If one party fails to pay their share, the other could be responsible for the full mortgage, and disputes over equity or responsibilities can become complicated and costly.

Finding Resolution

When couples disagree about what to do with the home, mediation or negotiation is usually the first step. Courts in California generally won’t force couples into a co-ownership arrangement, but they may order a sale if no agreement can be reached.

Attorneys often encourage clients to look at the bigger picture: the house is one part of the overall property division. Sometimes it makes sense to let go of the family home in exchange for retirement funds, investments, or other assets that better support long-term financial stability.

Making the Right Choice for Your Home After Divorce

Deciding the fate of the family home is one of the most consequential choices in a divorce. Selling can provide a clean break, a buyout allows one spouse to maintain continuity, and temporary co-ownership can help bridge the transition, though it’s rarely a long-term solution.

At Whiting, Ross, Abel & Campbell, we combine legal expertise with practical guidance to help clients evaluate their options, anticipate challenges, and protect their financial and personal interests. We focus on strategies that fit your situation, ensuring both legal requirements and life realities are considered.

If you’re facing decisions about the family home, our team can help you weigh the choices, understand the consequences, and move forward with clarity and confidence. Contact us today to schedule a consultation and get expert guidance tailored to your needs.

 

The above is not meant to be legal advice, and every case is different. Feel free to reach out to us at Whiting, Ross, Abel & Campbell, LLP if you have any questions. Information contained in this content and website should not be relied on as legal advice. You should consult an attorney for advice on your specific situation. 

Visiting this site or relying on information gleaned from the site does not create an attorney-client relationship. The content on this website is the property of Whiting, Ross, Abel & Campbell, LLP and may not be used without the written consent thereof.

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Ask Our Expert Attorneys

Yes, you can keep the house, but the court will consider whether it is community property and may require a buyout or other arrangement to ensure an equal division of assets.

You can choose to sell the home and split the proceeds, have one spouse buy out the other’s share, or continue co-owning it temporarily while determining long-term arrangements.

In California, community property law generally requires that equity built during the marriage be divided equally, though contributions, debts, and pre-marriage ownership can affect the final calculation.

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