Who Gets the House in a California Divorce?

If you own a house or condo in California, it's probably your most valuable asset. So when you're getting a California divorce, one of the difficult issues will be deciding who will keep the family home. You'll need to consider a number of things, including who owns or has an interest in the property, whether either of you can afford to keep it, where your kids will live if you have children at home, and taxes. Here's an overview of the issues related to dealing with a house after divorce.

Whose House Is It?

In a California divorce, a couple's community property will be divided between them (either as part of their settlement agreement or by the judge after a trial). Each spouse will usually keep their own separate property.

So the first step in figuring out what will happen to the family home is to determine whether it's community property (belonging to both spouses) or separate property (belonging to one of them).

Community Property Presumption in California

In California, property that spouses acquire during their marriage is community property, except for gifts, inheritances, and profits or rents on separate property (such as a second home or business that was owned before the marriage). Also, California law presumes that all property spouses acquire during the marriage as joint tenants is community property, unless they have written proof otherwise—such as a clear statement or a written agreement that it's separate property. (Cal. Fam. Code §§ 760, 770, 2581 (2023).)

So, for instance, your house would be community property—and both you and your spouse would have an equal interest in it—if you:

• bought the home together during marriage
• are both listed on the title, and
• used only community property funds for the down payment and mortgage payments.

Of course, it's not always that simple. For example, say you and your spouse bought home during the marriage, but the title is in your spouse's name only. Based on the title, the law presumes that the home belongs to your spouse as separate property. You might be able to overcome that presumption by proving the two of you had an agreement that you both owned the house. But you'll need strong evidence to back up your claim. (Cal. Evid. Code § 662 (2022).)

When a House Is Separate Property

A home that a spouse bought before marriage is generally that spouse's separate property. The same might be true if one spouse inherited a house during the marriage. But if the other spouse has contributed money toward paying off the mortgage or making improvements on the property, that spouse would have an interest in the home and would be entitled to reimbursement for that interest (more on that below).

What Happens to the House in Divorce: Buyout, Sale, or Deferred Sale

There are three basic options for dividing a community property house in a California divorce: a buyout, an immediate sale, or a deferred sale.

Spousal Buyout

If you have enough other assets besides the family home, one of you may decide to take full ownership of the property and pay the other spouse for their share—an arrangement usually known as a buyout. Here's how it works:

• Valuation. First, you'll need to agree what the house is worth. You might agree to use an estimated value from a realty website or a local realtor. Or you could hire a professional appraiser to determine the current fair market value of the property.
• Equity. From there, it's simple to figure out how much equity you and your spouse have in the property by subtracting what you owe on the mortgage from the current value. For example, if your community property home is currently worth $1 million and you still owe $600,000, the total equity is $400,000.
• Buyout amount. Because community property is split equally in a California divorce, the spouse who's buying out the house will need to pay the other spouse 50% of the equity (or $200,000 in the above example), plus any reimbursements for the other spouse's separate property contributions

Particularly in the California housing market, many people will find it difficult to come up with the money to pay their spouse half of the equity on a home. But remember that you don't have to pay your spouse in cash. Other options include:

• trading other assets (such as retirement accounts) to balance out the overall property division, and
• refinancing.

You'll usually need to refinance anyway, in order to remove your spouse from the mortgage. But there are serious financial hurdles to taking out a big enough new loan for a buyout. (Learn more about refinancing and negotiating a buyout of the family home.)

In addition to finding enough assets for a buyout, you'll need to consider whether you'll be able to handle the ongoing costs of keeping the house, including mortgage payments, insurance, and property taxes. You should also speak with a tax consultant to learn about the tax consequences of a buyout.

Immediate Sale

You may agree (or the judge may order you) to sell the family home and split the profits from the sale. This is often the only feasible option when neither of you is in a financial position to buy out the other. If your home is "underwater"—meaning you owe more on the house than it can be sold for—you and your spouse will share equally in the loss.

Deferred Sale

In some situations, it may make sense to continue to co-own the family home after the divorce and sell it at a later date. For example:

• Couples (or the judge) may decide this is the best way to minimize the impact of the divorce on children, by allowing the kids to stay where they've been living and giving the custodial parent exclusive use and possession of the home for a certain period of time—such as until the children move out or are old enough to handle the stress of a move.
• You might decide on a deferred sale for financial reasons, such as when it's a bad market for sellers or interest rates are particularly high.

California judges may order a deferred sale of the family home in order to allow the custodial parent to stay there with the children, but they must first determine whether it would be economically feasible in light of the custodial parent's income, the availability of child support and spousal support, and any other sources of funds to make the mortgage payments.

If a deferred sale is economically feasible, the judge will also consider the following circumstances before making a decision:

• the children's ages and school grades
• how long the kids have lived in the home
• how close the home is to the children's school, child care, and other services
• the potential emotional impact of a move on the children
• whether the home has been modified to accommodate a child's or the custodial parent's physical disability
• how much the home's location allows the custodial parent to keep a job
• each spouse's financial ability to find suitable housing
• the potential financial hardship of a delayed sale for the parent who won't stay in the house (sometimes called the "out-spouse")
• the tax consequences for each spouse of a delayed sale, and
• any other factors that are relevant and fair to consider.

(Cal. Fam. Code §§ 3801, 3802 (2023).)

Reimbursement Issues Related to the Family Home

Whatever happens to the family home in a divorce, one of the spouses may be entitled to reimbursement in the following situations:

• Community funds paid for separate property: If a couple used community property funds to make mortgage payments or improve a home that belongs to one spouse as separate property, the other spouse has acquired an interest in the home. As part of the divorce, the couple (or the judge) will use a formula to calculate the amount of that interest in order to reimburse the non-owner spouse.
• Mortgage payments after separation ("Epstein credits"): Under California law, judges may order reimbursement for a spouse who used separate property funds to pay the mortgage on a community home after the date of separation and before the divorce, unless it would be unfair and unreasonable. (Cal. Fam. Code § 2640 (2023); In re Marriage of Epstein, 24 Cal.3d 76 (1979).) For example, a judge won't order reimbursement if the spouses agree there will be no reimbursement, the payments were intended as a gift, the spouse making the payments continued to live in the home and the payments were not substantially greater than the rental value of the home, or the payments were made instead of (or as a form of) spousal support.
• Exclusive use and possession of the family home after separation ("Watts charges"): When one spouse moves out of the family home during the divorce, the judge may order the spouse who stayed in the home to pay the other spouse for the fair rental rental value of the home during that time. (In re Marriage of Watts, 171 Cal.App.3d 366 (1985).)

Getting Help With Your Home and Divorce

As with all issues in divorce, you'll save a lot of money and stress if you and your spouse can agree what to do with your house rather having a judge decide for you after a trial. You can get help negotiating a settlement in mediation, but you may need expert advice to help you understand the tax consequences and other financial considerations.

An experienced family law attorney can also help you understand how other issues in your divorce (like spousal support, child custody, and child support) are connected to what you do with the family home. And if you aren't able to reach an agreement with your spouse, you'll almost certainly need a lawyer's help to fight for your rights.