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Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 33732
Experience:  15 years real estate, Realtor. Landlord 26 years
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Wife and I are splitting. She is keeping the house more

Customer Question

Wife and I are splitting. She is keeping the house for 5 more years until our son graduates high school. I'm going to keep my share of the equity in the house and get it out once she sells. She thinks that the value of the equity now should be the amount I get out after it sells. If I don't get my equity until it sells, then I want it based on the future selling price. She thinks that her "sweat equity" in maintaining the house until then negates my portion of the increased value. Both of us want to be fair to one another. Is there a way to determine what makes the most sense?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Barrister replied 1 year ago.
Hello and welcome. My name is ***** ***** I will do what I can to help...In a situation like this, it is true that she is going to be responsible for all the "carrying costs" of the house for the next five years. However, you are choosing to let your equity sit in the property for the next 5 years, where it could go up or down, depending on the housing market. She is also getting the use of the property, while you are having to secure new accomdations. If you don't receive something for you leaving your equity in the property, you are essentially making her an interest free loan for the next 5 years..So this would be my suggestion. You agree that your "floor" is half the equity value today. You will agree to "loan" her your equity and in return for half of any appreciation in the house in 5 years minus her principle payments that she makes to reduce the outstanding debt. Get an appraisal now to determine fair market value. Then in 5 years, get another appraisal to determine FMV. Then if the house has gone up $20K in value and she has paid $5K in principle, then you pay her back her $5K out of the proceeds and split the rest. If the house goes down in value, then your floor is half the value today and by keeping the house, wife has assumed all the risk of possessing it instead of selling now...thanksBarrister
Customer: replied 1 year ago.

Thank you. So, in regard to "sweat equity" the non-financial upkeep / maintenance she puts into the house... is that worth anything? ie - she's keeping it beautiful and in good shape so that it will sell in 5 years...

Expert:  Barrister replied 1 year ago.
Well, she is getting to enjoy the use of the house as part of her sweat equity. Otherwise she would have to pay rent or a mortgage elsewhere and she wouldn't get to use your half of the money. But if you wanted to agree to split any costs such as repairs if necessary, I think that would be reasonable. So if you need a new water heater, that is reasonable, but if she wants to renovate the bathroom, I don't think that would be reasonable. ..thanksBarrister