Divorces involving vacation homes can be a complicated matter. As a couple negotiates the terms of their divorce, they are faced with the option to either sell the house and split the profits between both parties accordingly, or to agree on one spouse’s sole ownership of the property. If you find yourself in this situation, consider the following:
Consider the housing market for vacation homes. If you are considering selling the property, have the house appraised and consult with a realtor regarding the success of vacation home sales in the city your property is located. Profiting from selling a vacation home in today’s housing market can be difficult to do. It is not uncommon for a vacation home to sell for much less than the original purchase price, or even for less than its actual cash value. According to research from the National Association of Realtors, the median sale price of vacation homes has fallen 40% between 2005 and 2011. Additionally, there is no way to predict the future of the housing market, which puts you at risk for losing a great deal of money.
Consider the tax implications of selling. Selling a vacation home has different tax implications than that of selling the house of main residence. In the sale of the main home, profits are not subject to taxation on capital gains on up to $250,000 ($500,000 for married couples). However, such protection from taxation on is not allowed on the profits from the sale of a vacation home.
One way to avoid this issue of capital gains is to declare the vacation home your main home. This can legally be done by residing in the home for a minimum of 2 years. This may not be a realistic option for most people, as most vacation homes are located a significant distance away from where the couple has established their lives. However, moving to a new area and establishing residence in the vacation home could be exactly what a divorcing individual needs as he/she enters this new season of life.
Don’t let your emotions outweigh your ability to make a logical decision. For some people, their fondest memories may have occurred at their vacation home. The thought of losing the place where you and your children experienced some of your best times can easily influence your ability to make a wise decision regarding your future. Divorce settlements should be approached with somewhat of a business mindset, and decisions should be made on a logical basis with you and your children’s long term well-being in mind.
Don’t accept the property if you can’t afford to maintain it. If you are considering accepting sole ownership of the property and have intentions of keeping it, be sure that you can afford to maintain it. Such maintenance can include an extra mortgage payment, utility expenses, property taxes, etc. These costs may not have been difficult to take care of when you were married and living on two incomes, but living on one income may now affect your ability to keep the home.
As you negotiate the terms of your divorce with your spouse, it may be in your best interest to consult with a divorce attorney who has expertise in matters of real estate. At the Law Office of Bradley R. Tengler, we offer free consultations. For more information on your options regarding divorce and vacation homes, please feel free to contact our office at 815-981-4859. Please note, the above does not constitute legal advice. Please discuss your specific rights with an attorney in your own jurisdiction.