Divorcing in Austin's Hot Real Estate Market: What to Do When Your Home Has Doubled in Value

Written By Erik Alicea

When divorcing in Austin's hot real estate market, couples with significantly appreciated homes must choose between selling and splitting the proceeds, having one spouse buy out the other's equity, or deferring the sale.

Key Takeaways:

  • Texas is a community property state, meaning home equity acquired during marriage is generally divided fairly between spouses, though not always 50/50. Factors like earning capacity, fault, and children's needs can influence how courts divide property.

  • One spouse keeping the home requires buying out the other's share of equity, which in Austin's high-value market often means coming up with hundreds of thousands of dollars through refinancing, trading other assets, or a combination of both.

  • Before deciding to keep the family home, divorcing spouses should create a realistic post-divorce budget that accounts for mortgage payments, Austin's rising property taxes, insurance, maintenance, and repairs on a single income.

You bought your Austin home five years ago for $450,000. Today, it's worth over $900,000. What felt like a smart investment has now become one of the most complicated parts of your divorce.

If this sounds familiar, you're not alone. Austin's real estate explosion has created a unique challenge for divorcing couples: homes that have appreciated so dramatically that dividing them fairly (or figuring out whether one spouse can afford to keep the house) has become incredibly complex.

This guide walks you through what you need to know about handling significant home equity in an Austin divorce.

Why Austin's Real Estate Market Makes Divorce More Complicated

Austin's housing market has been on a remarkable run, with some neighborhoods seeing values double or even triple over the past decade. What was once a modest family home in Circle C, Westlake, or East Austin may now represent the largest asset in your marriage.

This creates challenges that divorcing couples in other cities don't face to the same degree. The sheer amount of equity at stake makes deciding what to do with your home a major financial decision, not just an emotional one. Austin's high property values mean that buying out a spouse's share requires significant cash or financing that may not be realistic for one income. And the Austin market moves fast, so timing decisions about selling or refinancing can significantly impact the outcome.

Understanding Community Property and Your Home

Texas is a community property state, meaning assets acquired during the marriage generally belong equally to both spouses. If you purchased your home after getting married, the equity you've built is typically considered community property subject to division.

But courts aim for a "just and right" division, which doesn't always mean exactly 50/50. Factors like each spouse's earning capacity, fault in the marriage, and the needs of any children can influence how property gets divided. Additionally, if one spouse owned the home before marriage or used separate property funds for the down payment, portions of the equity may be considered separate property.

The bottom line: just because your home has doubled in value doesn't automatically mean you each walk away with half. The specifics of your situation matter.

Your Three Main Options for the Family Home

When significant home equity is on the table, divorcing couples typically have three paths forward.

Option One: Sell the Home and Split the Proceeds

Selling is often the cleanest solution, especially when neither spouse can afford to buy out the other. You list the property, pay off the mortgage, and divide the remaining equity according to your settlement agreement.

However, selling comes with costs. Real estate commissions, closing costs, and potential capital gains taxes all reduce what you actually walk away with. If you've lived in the home for at least two of the last five years, you may qualify for the capital gains exclusion—up to $250,000 for individuals or $500,000 for married couples filing jointly. But if your Austin home has appreciated beyond those thresholds, you could face a tax bill.

Selling also means both spouses need to find new housing in a market where prices and rents remain high.

Option Two: One Spouse Keeps the Home

If one spouse wants to stay in the family home, often for the sake of children's stability, they'll need to buy out the other spouse's share of the equity.

Here's where Austin's appreciation creates real challenges. If your home is worth $900,000 with a $300,000 mortgage, you have $600,000 in equity. A 50/50 split means the spouse keeping the home needs to come up with $300,000 to compensate the other spouse.

That buyout can happen through refinancing, trading other assets of equivalent value, or a combination of both. The spouse keeping the home also needs to qualify for a new mortgage on their own income, which isn't always possible for Austin homes in the $800,000-plus range.

Before committing to keeping the house, run the numbers honestly. Can you actually afford it on one income? Sometimes the emotional desire to stay conflicts with financial reality.

Option Three: Deferred Sale

Some couples agree to delay selling until a specific trigger event, often when the youngest child graduates high school. This arrangement prioritizes stability for kids during a difficult transition.

Deferred sales come with complications. Both spouses remain financially tied to the property, which can create tension and limit each person's ability to move forward. You'll need clear agreements about who pays the mortgage, taxes, insurance, and maintenance. And you're both exposed to market risk.

This option works best for couples who can maintain cooperative communication and prioritize their children's stability over a clean financial break.

Factors to Consider Before Making Your Decision

  • Your Cash Flow After Divorce - Before deciding to keep the house, create a realistic post-divorce budget. Include the mortgage, property taxes (which have also risen significantly in Austin), insurance, maintenance, and utilities. Divorce typically means two households living on income that previously supported one.

  • Your Children's Needs - Staying in the family home can provide continuity during a difficult transition. But forcing yourself into a financially strained situation creates different kinds of stress that also affect your kids.

  • Your Emotional Attachment - Be honest about why you want to keep the home. Is it because staying genuinely serves your goals? Or is it because letting go feels like losing something else? Both feelings are valid, but they lead to different decisions.

Common Mistakes to Avoid

  • Making Emotional Decisions - The family home carries memories and meaning. But keeping a house you can't afford or fighting over property out of spite creates problems that outlast the emotional satisfaction.

  • Underestimating Costs - Homeownership costs more than the mortgage payment. Property taxes, insurance, HOA fees, maintenance, and repairs add up—especially in Austin, where property values and therefore property taxes have climbed significantly.

  • Ignoring Tax Consequences - How you divide home equity affects your tax situation. Selling, refinancing, or trading assets for equity all have different tax implications. Understand these before you commit to a plan.

How Hembree Bell Law Firm Helps Austin Families Navigate Real Estate in Divorce

At Hembree Bell Law Firm, we understand that your home isn't just an asset—it's where you've built your life. Our Austin divorce attorneys have helped countless families navigate the complexities of dividing significant home equity, and we bring both legal skill and genuine compassion to every case.

Led by award-winning attorney Hannah Hembree Bell, who has been through divorce herself, our team knows that these decisions are deeply personal. We take time to understand your goals, explain your options in plain language, and help you make choices that serve your long-term financial well-being beyond the emotions of the moment.

We've earned recognition from Forbes, Texas Monthly, and Super Lawyers Rising Stars, but what matters most to us is helping Austin families move forward with clarity and confidence.

Your home may have doubled in value, but that doesn't have to double your stress. Call Hembree Bell Law Firm today to schedule your free case evaluation and discover how we can help you protect your financial future while building the next chapter of your life.


Erik Alicea
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