When a married couple is divorcing, there are four basic ways to handle their Fort Lauderdale real estate assets:

1. One party buys out the other
2. Sell the asset, split the proceeds
3. Continue joint ownership
4. The Court orders the property sold

One party buys out the other

Several factors come into play with this scenario, and it all begins with the mortgage (if one exists).

Are both parties responsible for the note? Keep in mind, the deed states ownership, the note indicates who’s obligated for the note payment, and finally, the mortgage will create a lien on the property (securing the note).

Chances are, both parties are on the mortgage, especially if it was their homestead (both are required to make the mortgage enforceable).

However, there are times only one party is on the hook, and that person will continue to be responsible for the payments — even if they sell the property to the other spouse. To release their obligation, the receiving-ownership spouse must refinance or convince the lender to release the transferring spouse.

This is important and bears worth repeating.

If only one spouse is obligated by the note, the easiest solution is to have the other spouse buy out the other. When both parties are on the loan, make sure the receiving spouse qualifies for refinancing, otherwise, the underlying note continues to be a burden to both parties.

There’s another scenario when one spouse doesn’t qualify but agrees to buy out the other. Here, the receiving spouse agrees to indemnify defend and hold the transferring spouse harmless in the event of default.

There are a couple of issues with this solution. One, the transferring spouse has no control of the other’s payment history (they could go belly up — putting both parties are at risk of a foreclosure). Additionally, not being released from the note may impact one’s credit history (skewing the debt to income ratio). Lastly, the promise to indemnify is only as good as the one making the promise … if there’s no money, the promise is likely worthless.

Sell the asset, split the proceeds

When neither of the parties qualify for refinancing, or they cannot agree on the fair market value, then you might consider selling to a third-party. In this situation, both parties allow a realtor to sell the asset (and let the market determine the value).

Continue joint ownership

In this scenario, both parties continue to own the property jointly. Typically, this happens when there’s a belief the property’s value will increase in the near term, or there are young children in school.

After the divorce, the title is held as “joint tenants or tenants in common.” Unlike a marital asset, a judgment creditor could force the sale of the property to pay an outstanding judgment.

The Court orders the property sold

If the parties are unable to agree on any of the above, the final solution is to include a partition action in your divorce petition. Here, the Court requires the couple to sell the asset to a third party; likely satisfying the mortgage and releasing both spouses from the underlying debt.

For those assets with no equity or are underwater, the sale won’t satisfy the debt. Any remaining liability is allocated after the sale or perhaps eliminated during a negotiated short sale (releasing both parties from any deficiency).

Of course, these are just the basic approaches, and variations to each may be tailored to your specific situation. An experienced Fort Lauderdale Real Estate attorney can advise you about the risks of each approach, helping you to make an informed decision.