The first steps to a successful disposition of the marital property in a divorce is to have a clear understanding of your own financial position. An accurate understanding of your financial situation or the emotional turmoil of divorce may cause you to make ‘snap decisions’ that could adversely impact your future financial position. A Real Estate Divorce Specialist with experience in Family Law will help you not make mistakes that can harm your future.
Likewise, I realize that at least one, if not both, spouses will have to find alternate living arrangements. As your listing agent I will, if you desire, not only list and sell your marital home but assist you in locating a new rental apartment, home or the purchase of a new home.
LEGAL AND FINANCIAL RESPONSIBILITY
It is crucial to know who bears legal and financial responsibility for making the mortgage payments and that these payments are made and on time along with other payments for HOA fees, taxes and insurance, especially if these are not incorporated into the monthly payment in escrow.
- Mortgage payment, if both are on the mortgage, whether on deed/title or not and especially if one spouse living in home and one or both making the payment
- The following must be accounted for, especially if not escrowed with lender in mortgage payment:
- Homeowner’s association (HOA) fees
- Homeowner’s insurance – be sure to check which party is beneficiary
- Property taxes and liens
- Second mortgage such as a HELOC or other loans that encumber the property
- Utilities – those related to the home may include electricity and / or gas and water
- A reasonable set aside for maintenance and repair PLUS which party will pay for repairs
It is critical that you collect and immediately provide to your attorney with all information regarding your home insurance, property taxes and liens, mortgage and marital debts, and marital assets. The more prepared you are to face your financial future, the more secure you will be moving forward. Knowing where every dollar is and where it must go will help you make better decisions and avoid adding undue additional stress to the already uncertain future that accompanies divorce.
The following are the main options to consider regarding the marital home (possibly only one piece of the marital property), and requires a significant amount of due diligence, financial planning, and difficult decisions. The bottom line is that knowing your financial situation will bring you some security that is very important for you at this turbulent and pivotal time in your life.
Affordability and objective forethought are the keys to your decision-making process. Inaccurate, incomplete and bad information results in poor decisions that can affect you and your former spouse, long after the divorce is finalized.
KEEPING THE HOUSE
When divorcing couples have school-age children, they often decide to allow one spouse to remain in the home to avoid disrupting the children’s routine, school attendance, and social relationships. This can be accomplished with the aid of legal counsel who will draw up written agreements between the spouses. About one-third of divorces end up in court because of disagreement over marital property division. if you’re in that unfortunate one-third, going to trial doubles the cost of the divorce. As an experienced Divorce Real Estate Specialist, I know how to work with your attorneys to provide them with the information to help you settle on an agreeable division of your real estate property.
Your attorney, or a court appointed mediator, may prepare a clear-cut agreement, signed by both parties, help avoid contention surrounding responsibility for the maintenance, expenses, and future sale of the family home, whether it be to the spouse who remains in residence or an outside buyer. This is why it is important to know your financial position and how much each spouse can contribute. If one spouse fails to make their share of payments, it can negatively affect both parties’ credit ratings and complicate the later sale of the home as well as the ability to obtain a rental property or even worse impact the purchase of another home. Worse yet, the responsible spouse fails to make required payments and the house gets set for foreclosure!
SELLING THE HOUSE
For most couples going through a divorce, selling the house is the best solution. Selling a home under any circumstances takes a great deal of time and effort, so the addition of the emotional stress of divorce can make the task overwhelming. This is where I have been able to help so many couples. I am not only an experienced Realtor, a Certified Divorce Specialist but also a participant in my own divorce – I have been where you are!
THE EMOTIONAL SIDE OF SELLING YOUR HOME
If the marital home has been the hub of happiness and family life, it may turn out to be a constant reminder of what once was and is no more. The good memories the home represents are now tainted by the unhappiness and pain of divorce. No matter how strong sentimental value may be, often the best option is to sell the house and move on. That way, both spouses get some money to hopefully make a clean break and start fresh. Once you’ve decided to sell, there is a long “to-do” list — a list that is difficult under the best of circumstances and only made more difficult with the added emotion of divorce. As your Realtor, it is my one of my functions to help you plan the sale of your property and I have preset lists of things that must be addressed before listing, during listing process and upon the sale and closing. I am your source for everything relating to the sale of your property and it is my job to make the sale go as smoothly for you as can be accomplished.
As noted above, the liability of keeping a home may be the best reason to sell. There are various ways to keep a house with one spouse remaining and the other departing, but all carry a share of risks and challenges. An equity buyout occurs when one spouse keeps the asset, and, in exchange, compensates the other for his or her share of the equity.
If one spouse is in a financial position to manage the cost of ownership, it may be practical to buy out the other’s share of the property. This would also entail refinancing the home. The real challenges come in working out the details. There could be disagreement about the selling price or the market value or, the equitable division of the property may not meet expectations especially if the equity share is being relied upon for a down payment on another property or rental.
Other questions that arise include the possibility of giving up marital property rights in exchange for other assets, like investments. The ex-spouse may lose out on future appreciation of the house. It is crucial to know that questions like these will arise when it comes to the division of property in a buyout situation and you need to be prepared to address them in a business-like manner.
I strongly suggest that you leave the opinions of friends and family aside and rely on your attorney who is the best and most well-equipped person to help a divorcing couple determine the pre-trial division of marital property.
Assuming the house market value has appreciated, who is entitled to the equity? Of course, in Texas, as a “community property” state, the equity is split 50/50 unless there are other criteria to be honored such as a Pre-Nuptial Agreement.
What if the property is appraised lower than the current loan? All scenarios must be considered before deciding on a buyout. Again, knowing your financial standing before filing for a divorce is paramount. This is where I can bring some clarity very quickly and that is by preparing a Comparative Market Analysis (CMA) of your home that provides the recommend selling price based on a wide range of objective and subjective criteria.
If you or your spouse want to keep the house and buy out the other, but need time before this can be accomplished, co-ownership is a possibility. However, maintaining a clear channel of communication with the ex-spouse is a major part of co-ownership and one of the most difficult to achieve because it requires a lot of mutual trust, something that is typically lacking in most divorce scenarios. The goal is to move forward, so any concessions made between the spouses benefit not only both parties but especially the children.
The drawback to this type of arrangement is the negative consequences if the spouse in residence, or the responsible spouse, defaults on mortgage payments. Both parties are still responsible and missed payments will affect both spouse’s credit scores. An attorney should be consulted to arrange this as in most states this would be considered a “Separate Maintenance Agreement” that would also likely require approval of the Court.
Walking away from your home and mortgage is not tolerated by the courts. The lender will add to the complications of your divorce by taking legal action to receive the remaining balance.
Many divorcing couples who want to limit legal fees as much as possible, as well as the time it takes to settle, choose to sell their home. Surveys show that couples who resolved their property issues without court intervention completed the divorce in under a year. Those who could not agree and went to trial had to wait an average of 15 to 16 months. Some states require divorces to be resolved within a year, but dockets are full in most states, which causes long wait times for a divorce trial. While you’re waiting for the trial date, the mortgage still must be paid, as well as utilities, insurance, and property taxes.
The rest of this book will expand upon the benefits of marital agreements that help sell the home, the importance of having realistic expectations regarding the value of your home, and how choosing a Realtor who has experience working with divorcing couples may be your greatest asset in the sale of your home.
We are uniquely and specifically qualified, as you have already read, to help you handle your situation with the marital home and other properties that you may need to consider. Please contact Geni for a no obligation review of your situation at 469-556-1185.
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