Minnesota Divorce & Real Estate: When “Equity” Isn’t What It Seems
In Minnesota divorce cases, the marital home is often the largest shared asset—and frequently the most misunderstood.
This month’s tip follows a sobering example scenario:
A divorcing couple believed the equity in their home would help fund several post-divorce obligations, including their child’s senior-year college tuition. The numbers appeared sound on paper. But when the property was finally reviewed for sale, the projected profit had been overstated.
There were no proceeds.
The result? Their son was forced to withdraw from school midyear.
While this example is not an actual case, it reflects a very real and recurring issue in divorce: equity is often treated as a simple math problem when it is anything but.
Small miscalculations—often overlooked early in negotiations—can materially change a party’s financial outcome, sometimes by tens of thousands of dollars.
Below are three of the most common areas where equity is overstated or misunderstood in Minnesota divorce cases.
1. Assuming: Market Value – Mortgage Balance = Net Equity
This is one of the most common—and costly—assumptions.
Online valuation tools or informal broker opinions are frequently used as substitutes for true market value. However, equity is not what a property is “worth on paper.” It is what remains after all costs required to sell or transfer the property.
Too often, calculations fail to include:
Realtor commissions
Seller-paid buyer’s closing costs and/or concessions
Market-specific pricing adjustments
Transfer taxes and recording fees
Typical negotiation credits in current market conditions
When these factors are ignored, settlement discussions can be built on unrealistic expectations—leading to stalled negotiations or painful corrections later.
2. Overlooking Deferred Maintenance and Non-Standard Improvements
Condition matters.
Deferred maintenance such as aging roofs, failing HVAC systems, foundation issues, or outdated mechanicals directly impacts both value and buyer demand.
Equally problematic are non-standard or unpermitted improvements, including:
Garage conversions
Enclosed patios or porches
Unapproved ADUs
Solar systems with liens or long-term transfer obligations
These features may not add value—and in some cases, they reduce it. They can also require remediation before a sale or refinance is approved.
When these issues are discovered late in the process, they often derail carefully negotiated agreements.
3. Payoff and Proceeds Miscalculations
Mortgage balances alone rarely tell the full story.
Equity projections are frequently distorted by:
Incorrect payoff figures (particularly with HELOCs or adjustable-rate loans)
Deferred principal from loan modifications or forbearance programs
Outstanding liens, judgments, or unpaid contractor invoices
Unaccounted prorations for taxes, HOA dues, or rental income
Prepayment penalties or transfer fees revealed late in escrow
Each of these items can materially reduce net proceeds—and should be verified before a settlement is finalized, not after.
A Practical Tip
Before relying on a headline equity number, ask:
“If this property were sold or transferred tomorrow, what would each party actually walk away with?”
Bringing in a Certified Divorce Real Estate Expert (CDRE®) early in the process—before decisions are locked in—can help surface potential issues, clarify true financial outcomes, and prevent:
Post-decree disputes
Renegotiation under pressure
Unexpected shortfalls at closing
Real Estate Issue to Spot This Month: Equity Red Flags
Before relying on a stated equity figure, confirm whether:
The value is based on an online estimate or informal opinion
Deferred maintenance or unpermitted/non-standard improvements were ignored
HELOCs, secondary loans, or solar liens were excluded from payoff figures
Taxes, HOA dues, rents, or delinquent payments were not verified
Liens, judgments, transfer fees, or prepayment penalties may reduce proceeds
Why This Matters
Any one of these issues can significantly change what divorcing parties ultimately receive—and once settlement terms are finalized, correcting the numbers may be difficult or impossible.
As a Certified Divorce Real Estate Expert, I assist with attorneys and mediators in assessing equity scenarios before decisions regarding the marital home are finalized—helping create clarity, reduce risk, and strengthen settlement outcomes.
Shannon Lindstrom, Realtor®, CDRE®, GREEN, MILRES, MRP, VCA
RE/MAX Results
7373 Kirkwood Court No, Ste. 300
Maple Grove, MN 55369
Direct: 612-616-9714
Lindstrom_S@msn.com
Shannon@ShannonLindstromRealtor.com
www.ShannonLindstromRealtor.com
www.ShannonLindstrom.info
https://www.ilumniinstitute.com/cdre/shannon-lindstrom
www.MNDivorceRealEstateExpert.com
