By: KeyCrew Media
A Little Rock broker who spent two decades as a trial attorney explains why the appraisal will not settle the question, and why “fair” is not a strong enough reason to keep the house.
When a marriage ends, the house is often the largest asset a couple owns and the hardest one to divide. In Little Rock, Arkansas, a common solution is for one spouse to keep the home and buy out the other’s share. It sounds simple. In practice, it raises two difficult questions: should you keep it, and what is it actually worth?
Jerry Larkowski, Managing Broker at ESQ. Realty Group, LLC, spent about 20 years handling divorce cases as a trial attorney before stepping away from trial work in 2015. Today he is a dual-licensed real estate broker and attorney, which means he has seen home buyouts from both the legal side and the real estate side.
“Fair” isn’t a reason
Larkowski’s first point is about motive. “If one spouse is going to buy the other one out, it needs to be for a reason stronger than financially fair,” he says.
A buyout is a serious commitment. The spouse who keeps the house usually has to come up with the other spouse’s share of the equity and take on the full mortgage, often by refinancing into their own name. If both names are on the current loan, both spouses generally remain responsible for it until it is refinanced, the home is sold, or the mortgage is paid off.
That is a lot to take on just to make the split come out even. The reason to keep the house should still make sense years from now, such as staying close to work or keeping children in the same school.
Appraisals aren’t exact
Arkansas law starts from an equal split. Under state statute, marital property, which generally includes a home bought during the marriage, is divided one-half to each spouse unless the court finds that division would be inequitable. That puts a lot of weight on a single number: what the house is worth.
Larkowski cautions against treating that number as precise. “Appraisals are not an exact science,” he says. “There is no absolute certainty in what the value of a home is.”
The gap can add up quickly. If two appraisals of the same home come in $20,000 apart, the departing spouse’s share of the equity moves by $10,000 depending on which one is used. In the end, Larkowski says, value “still comes down to what one will pay and the other will accept.”
The appraisal protects the lender
Many couples assume the lender’s appraisal will end the argument. Larkowski sees it differently. “The appraisal is simply for the loan’s security,” he says.
The lender orders an appraisal to confirm the house is worth enough to back the loan. It is not designed to decide what is fair between two spouses. If it comes in below the figure the couple agreed on, the lender will size the loan to the lower value, which can leave the spouse keeping the house short of the cash needed to complete the buyout.
A strong position can still lose
When spouses can’t agree on a number, the instinct is often to let a judge decide. Larkowski’s courtroom years left him cautious about that. “No matter how solid you think your position is in a transaction, no matter how much you think you are right, there is always a chance something could happen in the legal process that can deny you the trophy you think you were going to get,” he says.
He calls it the hardest lesson from his years as a lawyer, and one that most real estate agents never have to learn. For a divorcing couple, it is a reason to negotiate the value of the house seriously instead of counting on a court to see it their way.
A house is worth what one spouse will pay and the other will accept. Reaching that number by agreement keeps the decision in the couple’s own hands.
About ESQ. Realty Group, LLC
ESQ. Realty Group, LLC is a full-service real estate brokerage serving the Little Rock and Hot Springs markets in Central Arkansas.
Managing Broker Jerry Larkowski is a dual-licensed real estate broker and attorney with a background in trial law. Learn more at esqbrokers.com.
Disclaimer: This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
