Keeping the house: the buyout, the carrying cost, and deferred sale
Keeping the house is the most common thing people fight hardest for and the most common thing they regret. Not always, and not because it is sentimental — because the two numbers that decide it, the buyout price and the true carrying cost, are usually settled on before either has been worked out properly.
The buyout: how the number actually gets set
A buyout means one spouse pays the other for their share of the equity and keeps the house. The mechanics: how the value is set, whether hypothetical selling costs come off the top, how the mortgage is handled, and, in states that allow it, how a lien secures the payment, decide whether the number that ends up on paper is fair.
Home value for a buyout is typically established either by a licensed appraisal or by a real estate agent’s comparative market analysis (CMA), and the two are not interchangeable in rigor or cost.
Reported consistently, not settled
An appraisal is a formal, independent valuation performed by a licensed or certified appraiser, generally required by a lender for refinancing purposes and usable as a neutral figure both spouses can rely on in a settlement. A CMA is an informal estimate a real estate agent prepares by comparing recent sales of similar nearby homes; it is free or low-cost and useful for a general sense of value but is not a substitute for an appraisal when money and legal agreements turn on the exact figure.
Whether hypothetical costs of sale, a realtor commission and closing costs, are subtracted from the equity figure before splitting it between spouses is a genuine, commonly negotiated point, not a fixed rule.
Reported consistently, not settled
One position, often taken by the spouse keeping the house: since no sale is actually happening, no selling costs should be deducted, and the buyout should be based on the full appraised equity. The other position, often taken by the spouse being bought out: because the appraisal is only a proxy for what the home would fetch on the open market, and selling costs would reduce that number by several percentage points in a real sale, a fair buyout should discount the equity by an estimated cost of sale to reflect what the departing spouse would have actually received had the home been sold outright. Both positions are defensible; which one prevails is usually a matter of negotiation or, if litigated, a matter for the court or mediator to decide based on state law and the facts of the case.
General negotiating framework; not derived from a specific federal statute
Average total real estate commission has fallen slightly since the August 2024 changes to how buyer’s agents are compensated, with the average buyer’s agent commission around 2.4 percent in early 2025.
Redfin’s analysis of Q1 2025 sales found the average buyer’s agent commission was 2.40 percent, essentially flat since the new National Association of Realtors settlement rules took effect on August 17, 2024, though slightly down from 2.43 percent a year earlier. This is only the buyer’s side of the commission; a seller typically also pays their own listing agent, so the combined commission a seller pays is generally higher than the buyer’s-agent figure alone.
Redfin analysis of MLS data, published May 16, 2025
Refinancing an existing mortgage is usually necessary for a buyout, because keeping a joint mortgage after only one spouse keeps the house leaves the departing spouse’s credit and liability exposed to a loan they no longer benefit from.
Reported consistently, not settled
The spouse keeping the home typically must qualify to refinance the mortgage in their name alone, which requires sufficient individual income and credit. This is a practical lending reality, not a specific statutory rule, and it is often the real constraint on whether a buyout is even possible, separate from whether the numbers otherwise seem fair.
General mortgage underwriting practice
Texas’s constitution specifically permits a home equity lien for an ‘owelty of partition,’ including a debt one spouse owes the other from a divorce division of the family homestead.
Texas generally protects homestead property from most liens, but Article 16, Section 50(a) of the Texas Constitution lists exceptions. Subsection (a)(3) allows an owelty of partition lien imposed by court order or written agreement, and the text specifically includes a debt of one spouse in favor of the other resulting from a division or award of the family homestead in a divorce proceeding. This is the constitutional basis for using an owelty lien to secure a buyout payment against the house in a Texas divorce.
an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding
Tex. Const. art. XVI, s. 50(a)(3)
Fannie Mae’s Selling Guide treats loans secured by Texas homestead property differently under its Texas Section 50(a)(6) rules, which govern Texas home equity (cash-out) loans specifically, and lenders are told to independently confirm with counsel whether Section 50(a)(6) applies to a given transaction rather than relying on Fannie Mae’s own refinance-type classification.
Reported consistently, not settled
This confirms Section 50(a)(6) home equity loans are a distinct constitutional category from the Section 50(a)(3) owelty of partition lien, and that whether a given refinance to pay off an owelty obligation is treated as a Section 50(a)(6) loan, with its own restrictions including an 80 percent loan-to-value limit, is a legal determination made loan by loan. The specific claim that an owelty-secured refinance can reach a higher loan-to-value than a standard Section 50(a)(6) cash-out refinance could not be confirmed directly against Fannie Mae’s published guide text and should be treated as unverified pending a source that states it explicitly.
Lenders should not rely on Fannie Mae’s categorization of refinance loans for purposes of determining whether compliance with the provisions of Texas Constitution Section 50(a)(6) is required. Rather, such lenders should consult with their counsel to determine the applicability of Texas Constitution Section 50(a)(6) to a particular loan transaction.
Fannie Mae Selling Guide, B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility
A CMA is a useful starting point but is not the neutral, rigorous figure a licensed appraisal provides, and lenders financing a refinance to complete the buyout will typically require a real appraisal regardless. Treating a free CMA as the final word can leave real money on the table for whichever spouse it happens to favor.
What to actually do
- Get a licensed appraisal rather than relying solely on a realtor’s CMA when real money and a legal agreement depend on the number.
- Decide explicitly, in writing, whether the buyout figure will be based on gross equity or on equity net of an assumed cost of sale, and if net, what percentage is being assumed and why.
- Confirm early whether the spouse keeping the house can actually qualify to refinance the mortgage solely in their own name; this is often the real constraint on a buyout, separate from the price.
- In Texas, ask a Texas family law or real estate attorney whether an owelty of partition lien under Tex. Const. art. XVI, s. 50(a)(3) is the right mechanism to secure a buyout payment, and how it interacts with the separate Section 50(a)(6) home equity loan rules if refinancing is also happening.
- State homestead and lien law varies considerably outside Texas; the owelty of partition mechanism described here is specific to Texas and should not be assumed to exist, or to work the same way, in other states.
- The claim that an owelty-secured Texas refinance permits a higher loan-to-value ratio than a standard Section 50(a)(6) cash-out refinance we could not verified against Fannie Mae’s own published guide text in this research and should be confirmed with a Texas mortgage or real estate attorney before relying on it.
An appraisal values the home at 800,000 dollars. The couple has a 400,000 dollar mortgage balance remaining, leaving 400,000 dollars of equity on paper. One spouse wants to buy out the other’s half.
- Without deducting hypothetical selling costs: equity is 400,000 dollars, split evenly, so the departing spouse is owed 200,000 dollars.
- With a hypothetical 7 percent cost of sale deducted (a placeholder figure combining a commission in roughly the 2.4 to 6 percent range plus other closing costs, which varies by market and should be estimated locally rather than assumed): the discounted equity is 800,000 dollars minus 56,000 dollars minus the 400,000 dollar mortgage, or 344,000 dollars, split evenly, so the departing spouse is owed 172,000 dollars.
- The difference between the two approaches in this example is 28,000 dollars, entirely a function of which negotiating position prevails, not a difference in the underlying appraised value.
Whether to deduct hypothetical selling costs from the buyout figure is worth naming explicitly and deciding deliberately, because it can move tens of thousands of dollars without either side’s underlying claim to the house’s value having changed at all.
What keeping the house actually costs
The mortgage payment is only part of what it costs to keep a home. Property tax, insurance, maintenance, and the risk of becoming house poor on a single income all belong in the real math, and the widely repeated 1 percent maintenance rule of thumb does not appear to rest on any rigorous federal or industry study.
Homeowners insurance premiums rose meaningfully faster than inflation in disaster-prone areas between 2019 and 2024, with southern coastal areas seeing increases of 25 percent or more over that period, well above the roughly 3 percent inflation-adjusted national average increase.
A U.S. Government Accountability Office report examined homeowners insurance premium trends from 2019 to 2024 and found that while the national average premium rose only about 3 percent after adjusting for inflation, premiums in southern coastal areas rose 25 percent or more over the same period, and that states like Florida, Louisiana, and Oklahoma had the highest premiums relative to median household income. The report also found that moving from a medium to a high wind-risk area was associated with roughly 58 percent higher premiums, and moving to a high wildfire-risk area was associated with an 8 percent premium increase.
Southern coastal areas experienced increases of 25% or more
There is no verified rigorous federal or industry-standard study backing the commonly repeated ‘1 percent of home value per year’ rule for maintenance costs; it functions as a folk heuristic, not a documented finding.
Reported consistently, not settled
A search for the origin of the 1 percent maintenance rule did not surface a primary source, government agency figure, or peer-reviewed study establishing it. Freddie Mac’s own consumer-facing home maintenance guidance, checked directly, offers general budgeting advice but does not provide a specific percentage-of-value figure and does not reference or validate the 1 percent rule. On the honest state of the evidence, this page should say plainly that the 1 percent rule is a widely repeated shorthand without a documented empirical basis that this research could verify, rather than presenting it as a reliable, sourced figure.
The commonly cited ’30 percent of income on housing’ affordability guideline traces back to federal public housing policy, specifically the 1969 Brooke Amendment, which capped public housing rent at 25 percent of tenant income and was raised to 30 percent in 1981.
Reported consistently, not settled
Senator Edward Brooke’s 1969 amendment to federal housing law set the first statutory benchmark linking housing cost to a fixed share of tenant income, initially 25 percent. Congress raised that cap to 30 percent in 1981. Housing researchers and HUD itself describe this as the origin of what later became a general ‘rule of thumb’ applied well beyond public housing, to mortgage underwriting and general household budgeting.
the first instance of the benchmark to measure housing affordability, which became known as the ’30 percent rule of thumb’
HUD’s own research literature acknowledges that the 30 percent standard has become the conventional affordability benchmark used by policy analysts, without a rigorous universal empirical basis for every household situation.
Reported consistently, not settled
A HUD USER publication reviewing housing cost trends states that policy analysts have adopted the 30 percent standard over time to assess affordability, with the underlying rationale that spending above that share may force households to forgo other important needs. The publication itself questions whether a single flat percentage remains the right way to measure affordability across very different household budgets.
policy analysts have adopted the ’30 percent’ standard to assess the affordability of housing
HUD USER, ‘Trends in Housing Costs: 1985-2005 and the 30-Percent-of-Income Standard’
This research could not find a documented federal, academic, or major mortgage-industry study establishing the 1 percent figure as reliable. It should be treated as a rough, unverified heuristic. A homeowner is better served getting a realistic estimate from a local home inspector or contractor based on the specific home’s age, systems, and condition than relying on a flat percentage with no confirmed basis.
It originated as a specific statutory cap for federal public housing rent, first 25 percent under the 1969 Brooke Amendment, raised to 30 percent in 1981, and was later generalized into a rule of thumb used well outside its original context. HUD’s own research notes it is a convention adopted by analysts, not a rule fitted to every household’s actual expenses and income.
What to actually do
- Build a full carrying-cost budget before deciding to keep the house: mortgage principal and interest, property tax (check the actual current assessed bill, not an old one), homeowners insurance (get an actual current quote, not last year’s premium, especially in a state with rising climate risk), HOA dues if any, and a realistic maintenance reserve based on the home’s actual age and condition rather than a flat percentage.
- In a state with meaningfully higher wind or wildfire risk, get an actual insurance quote before finalizing any settlement that assumes a specific carrying cost; premiums in high-risk coastal and wildfire-exposed areas have moved much faster than general inflation in recent years.
- Treat the 30 percent housing-cost-to-income guideline as a starting sanity check, not a verdict; it was built for a different purpose (capping public housing rent) and does not account for an individual household’s debt, savings needs, or other obligations.
- Watch for ‘house poor’: meeting the mortgage payment technically while everything else, savings, retirement contributions, an emergency fund, gets squeezed out. A newly single income household is especially exposed to this because there is no second earner to absorb a shock.
- Property tax, insurance costs, and HOA fees are all highly local; the figures here are national trends and origins, not a specific quote for any individual home.
What I can actually afford
A mortgage lender’s approval is not the same question as what is actually safe for a newly single household. Getting this right means separating PITI from total ownership cost, and being honest about how much of a financial cushion a single income needs compared to two.
PITI, principal, interest, taxes, and insurance, is the standard components of a mortgage payment used in loan qualification, but it is not the same as the total cost of owning a home.
Reported consistently, not settled
Lenders qualify borrowers based largely on PITI relative to income, but total ownership cost also includes HOA dues where applicable, ongoing maintenance and repairs, and periodic large expenses like a roof or HVAC replacement, none of which show up in the PITI figure a lender uses to approve a loan.
General mortgage underwriting practice
The 30 percent housing-cost-to-income benchmark commonly used in affordability discussions traces back to the 1969 Brooke Amendment’s cap on public housing rent, later raised to 30 percent in 1981, and functions today as a general rule of thumb rather than a rule fitted to any individual household’s finances.
Reported consistently, not settled
See the carrying-costs topic for full sourcing. The relevance here is that a lender’s maximum approved payment is not automatically a safe payment for a specific household, especially one that has just gone from two incomes to one.
Brooke Amendment, 1969; amended 1981
The Consumer Financial Protection Bureau’s research found that having roughly one month of income in savings is a meaningful line between households at high risk of financial hardship and those at lower risk, and that this cushion correlates strongly with credit health and the ability to pay bills.
In CFPB’s 2022 research memo on emergency savings, 24 percent of consumers had no emergency savings at all, and 39 percent had less than one month of income saved. Households with at least one month of income saved were far less likely to have delinquent debt (5 percent, compared to 40 percent among those with no savings) and far less likely to have struggled to pay bills in the past year (6 percent, compared to 79 percent among those with no savings). The report frames one month of income as a critical threshold, not a fully sufficient cushion, and notes many financial planners recommend larger reserves for greater security.
roughly one month of savings may provide an important delineation between consumers who are in danger of financial hardship and those who are at a lower risk
Lender approval is based primarily on PITI relative to gross income and debt ratios, not on whether a household will still be able to save, handle an emergency, or absorb maintenance costs after paying it. Especially for someone who has just become a single-income household, treat loan approval as the ceiling to check against, not the answer to what is actually safe.
What to actually do
- Separate two numbers explicitly: the PITI a lender will approve, and the full cost of ownership including maintenance, HOA, and periodic big-ticket repairs. Budget against the second number, not the first.
- Before committing to keep or buy a home on a single income, build (or protect) an emergency fund; CFPB’s research suggests roughly one month of income marks a real difference in financial resilience, and many planners recommend a deeper cushion, three to six months of expenses, for greater security, especially for a household that no longer has a second income to fall back on.
- Run the numbers on the newly single income alone, not on what the household budget looked like when there were two incomes and, often, two people’s credit and savings behind it.
- Treat the 30 percent housing-cost-to-income guideline as a sanity check, not a target to spend up to; it was designed for a different purpose (a cap on public housing rent) and does not account for an individual’s actual debt, savings goals, or emergency fund needs.
- This section describes a general framework, not individualized financial advice; a fee-only financial planner or housing counselor can model an actual household budget more precisely than a general guideline.
Deferred sale orders and nesting
Some states let a court delay the sale of the family home so children can finish school in it, with one parent staying on as the resident parent. Nesting, where the children stay put and the parents rotate in and out, is a different, informal arrangement with real tradeoffs. Both keep an ex-couple financially and legally entangled in the house longer than a clean sale would.
California Family Code sections 3800 through 3810 create a statutory ‘deferred sale of home order,’ commonly called a Duke order, letting a court delay sale of the family residence to minimize the adverse impact of the divorce on the children.
Section 3800 defines the key terms: a ‘deferred sale of home order’ is one that temporarily delays the sale and awards temporary exclusive use and possession of the family home to the custodial parent, whether the residence is separate or community property, for the purpose of minimizing the adverse impact of the divorce or legal separation on the welfare of the child.
Before granting a deferred sale order, a California court must find it is economically feasible, meaning the resident parent can afford to maintain the mortgage payments, property taxes, insurance, and upkeep of the home.
Section 3801 sets out the economic feasibility determination, directing the court to look at the resident parent’s income, available spousal or child support, and other funding sources for these carrying costs before granting the order.
If a deferred sale is economically feasible, California courts then weigh a further list of factors, including the length of time the child has lived in the home, the child’s school placement, the home’s proximity to school and services, any needed physical accommodations, the emotional detriment of moving, the impact on each parent’s employment, each parent’s ability to obtain other housing, tax consequences, and the economic impact on the non-resident parent, before deciding whether to grant the order.
This is the balancing test under Section 3802, the discretionary factors a court considers once economic feasibility under Section 3801 is established.
Nesting, or ‘bird-nesting,’ is a custody arrangement in which the children stay full-time in the family home while the parents take turns living there during their respective custody periods.
This is the general legal definition. It is functionally the reverse of the usual arrangement: instead of children moving between two households, the parents are the ones who rotate.
Bird-nesting is a custody arrangement in which the children of separated or divorced parents live full-time in the family home, while the parents take turns residing there during their scheduled custody periods.
Cornell Law School, Legal Information Institute, Wex
What to actually do
- A deferred sale order in California, or an equivalent arrangement negotiated privately in states without a specific statute, keeps both former spouses financially tied to one house well after the divorce is final; treat this as a real ongoing obligation, not a closed chapter.
- Remaining a co-owner with an ex carries real tax and practical risk beyond the emotional strain: continued exposure if the resident co-owner falls behind on the mortgage or taxes, complications if either party needs to qualify for a new mortgage while still on this one, and the need to eventually apply the s. 121 and s. 1041 rules correctly whenever the home finally does sell or transfer.
- Nesting is generally understood in practitioner discussion as most workable as a short, defined-term bridge, weeks to a school semester, while parents sort out permanent housing, rather than an open-ended long-term arrangement; specific data on typical duration or long-term success rates we could not verified against a primary or empirical source in this research and should be treated as unverified rather than stated as fact.
- If considering a deferred sale, get the economic feasibility analysis right up front. California’s own statute requires the court to confirm the resident parent can actually afford the carrying costs before granting the order; the same discipline is worth applying even in states without a formal statutory mechanism.
- California’s ss. 3800-3810 deferred sale of home order is a California-specific statutory mechanism. Whether another state has an equivalent named statutory tool was not separately verified state by state in this research; a reader outside California should confirm what their own state’s family law provides rather than assume the California framework applies.
- Claims specifically about how long nesting arrangements typically last, or a quantified practitioner consensus on their success rate, we could not verified against a primary or rigorous empirical source in the time available for this research and are omitted rather than stated as fact.
Help with the house sets out the four things that can happen to it — a buyout, a deferred sale, a sale now, or the court deciding — and when it is too early to call an agent at all.
Disclosure: Hyleri Katzenberg · Compass — licensed real estate salesperson in Connecticut and Florida, and the person who writes this site. If you ask for an introduction to an agent elsewhere, she receives a referral fee from that agent, paid out of their commission and never added to what you pay. Nothing else on The Cusp works this way — nobody pays to be in the directory. How we make money.
We can introduce you to an agent who has done this kind of sale before — someone who knows what an automatic order does to a listing, and how to work a sale where the two owners are not speaking. There is no cost for the conversation and no obligation.
Ask for an introduction to an agent → — who we would introduce you to, what the referral fee is and who pays it, and why the answer is sometimes that you should not sell at all.