What is a Divorce Buyout?

A divorce home buyout (or a divorce buyout, for short) is simply when one party in a break-up buys out the other party’s share in the property that they own and have been residing in together. 

Divorce buyouts are generally completed according to the following 3 basic steps:

1. The parties determine and write into the separation agreement which of them will live in the home and which of them will have their interest in the property bought out.

2. The party buying out their ex-spouse (or soon-to-be-ex), then applies for a refinancing loan to take the place of the original loan, including borrowing enough extra money to compensate the party who is to be selling/losing interest in the property.

3. Two documents - a quitclaim deed and a consideration letter - are signed at the closing and filed in the recorder’s office of the county where the property is located.

It seems simple, yes? And in many cases, it is. Provided everybody’s on the same page, a divorce buyout could be one of the smoothest processes in the divorce proceedings. Could be.

However, far too often the divorce buyout is complicated by all that occurs prior to and during the process. The last thing you ever want to do in a divorce is complete the divorce proceedings without ever looking into whether or not you can really afford the court’s determinations and/or the settlement agreed to regarding the terms and conditions of the divorce home buyout arrangement.

If your spouse, for example, defaults on their payments while the divorce is still pending, not only could it severely negatively impact your ability to buy them out, but it can be detrimental to your credit rating as well.

It’s important to note, as well, that any divorce buyout agreement is incomplete without a date by which the buyout must be accomplished. This can cause a whole host of problems if an ex-spouse is reluctant to fulfill his or her end of the agreement, potentially dragging out the divorce buyout process indefinitely. In the worst of cases, you could even have to take them back to court to get it properly resolved, something no one want to have to do.

To eliminate (or at least minimize) these and other complications common in a divorce home buyout, the assistance of an experienced and reputable mortgage representative is highly recommended.