Dallas Divorce Law Blog by Michelle O'Neil

In dividing assets in a divorce, a dollar is not always a dollar.  For example, in a typical divorce, a couple will have a house, retirement accounts, cash accounts, personal property.  In dividing a house, typically the equity in a  house for purposes of the division of assets in a divorce, is calculated by subtracting the mortgage balance from the fair market value, leaving an equity balance that is used in negotiating a fair division.  However, a dollar in equity is not necessarily equal to a dollar of cash.  Equity can never really be determined until a house sells.  Equity is invisible money, not available to buy groceries.  Equity can only be converted to cash through a sale of the property or a loan repaid with interest.  Further, since in Texas a homeowner/borrower cannot get access to the top 20% of home value, the cash is only available if the asset is sold.

Declining property values in this economy means that the party who receives the house in the division of assets needs to think about how to assign value to the equity.  The possibility of future sale , including realtor fees andseller costs, should be considered in reaching the equitable settlement.

Hat tip to Noel Cookman of The Mortgage Institute for this information.