When one of you buys the other out

Start with one price

The quickest route to a buyout argument is two different values for the same house. Avoid that. I'll prepare one market analysis and give it to you both at once, and if you'd rather rely on an appraisal, I'll give the appraiser the same information I give you.

Then there's the question of costs. Under ORS 107.105, when the court divides property it considers reasonable costs of sale, taxes and other reasonably expected costs. Whether your buyout figure should subtract costs of a sale that isn't happening is a fair question for your attorney. Plug both versions into the equity split calculator and look at the difference.

The deed and the loan are separate

Here's the part that surprises people. A quitclaim deed changes who owns the house, but the mortgage is a contract with the lender, and a deed doesn't touch it. The spouse leaving stays on the loan until it's refinanced, paid off by a sale, or the lender agrees to release them.

If your loan is FHA, it's assumable, but the original borrower stays liable unless the lender releases them. Ask the lender about that release in writing. For a VA loan, start with the answer on assuming an FHA or VA loan and then call your lender.

Signing the quitclaim before the refinance closes can leave the departing spouse owing on a house they no longer own, so ask your attorney about having the deed and the refinance close together, at the same title company, on the same day.

Refinance rules worth knowing

Fannie Mae's Selling Guide lets a lender treat a divorce buyout as a limited cash-out refinance when the home was jointly owned for at least 12 months, there's a written agreement, and the spouse keeping the home gets no proceeds. Your loan officer will know whether it applies. Ask them by name.

There's also a federal rule that a lender can't call a loan due just because a divorce decree makes the borrower's spouse an owner. Rates move weekly, so I point people to the live Freddie Mac survey instead of quoting one. If you're not sure you can qualify alone, read what if I can't qualify to refinance alone.

If the agreement isn't signed yet, ask the loan officer what language they'd want to see in it, and pass that to both attorneys before anything is final.

Taxes on the transfer

IRS Publications 523 and 504 say a home transferred to a spouse or former spouse under a divorce is generally not a taxable sale. The spouse who keeps it takes over the other's tax basis, and counts the other's ownership time as their own. Those rules matter later, the day the house does sell.

Ask your CPA to explain the basis you'll carry. Keep the paperwork.

The spouse keeping the house should leave that appointment with a written note of the basis figure and the ownership dates it rests on, because that note will matter on the day the house finally sells, possibly many years from now.

Write in a fallback

Refinances fall through. I'd ask your attorney to put a deadline for the refinance into the agreement, along with what happens if it doesn't close by then, such as listing the house with a named method for setting the price. That way nobody has to renegotiate from scratch while a payment is coming due on a loan that has both of your names on it.

If you want, I'll write up a listing plan now and file it. It costs you nothing to have it ready. A fallback helps the spouse who is leaving, too. Knowing there's a date when the house either refinances or goes on the market makes it easier to plan a next home, and it gives both of you a reason to keep things moving.

The order I would follow

Don't skip the second step. A loan officer, an appraiser and both attorneys will each ask what the house is worth, and the conversation goes much more smoothly when every one of them is looking at the same document the two of you already agreed on.

1. Use keep or sell to see whether keeping the house works on one income.
2. Get a pricing analysis or an appraisal both of you see at the same time.
3. Talk to a loan officer about qualifying alone before the agreement is signed.
4. Have your attorneys write the agreement, including the refinance deadline and the fallback.
5. Close the refinance, then record the deed so ownership and the loan line up.