Divorce and Real Estate – Don’t be dumb, you have options

LawyerDivorceWelcome friends to the next installment of Divorce and Real Estate, Don’t be Dumb! After posting the original blog, I had several requests to elaborate on the possible remedies to the property situation. To the rescue was one of my favorite guys and world class mortgage loan originator, Jim Barker. Jim suggested an article he often refers to written by Tracy Achen for Womensdivorce.com. Tracy’s advice is fantastic for both men and women, I’ve included excepts from her article below because let’s be honest, she is clearly smarter than I am. Don’t be dumb.

Retain the Original Mortgage

Unfortunately, this is the option that many people unknowingly make when they get a divorce. In essence one spouse agrees to keep the home, but the mortgage isn’t changed after the divorce is finalized. If this is your situation, realize that if your ex doesn’t make the mortgage payments, it can ruin your credit if your ex defaults on the loan.

Maybe you want to retain the co-ownership of the home and leave the original mortgage intact until the children are grown. Once the children are gone, the house can be sold and the proceeds can be split. To make this arrangement work, both you and your ex should be able to cooperate in such a way that the mortgage payments, taxes and upkeep are paid in a timely fashion.

Like I said earlier, this is a risky proposition. First of all, do you really want to keep that closely tied to your ex. Secondly, if your ex has any future liens filed against him, they can be attached to your house. This ties up the title and makes it harder to sell the house. And finally, having an existing mortgage can make it difficult to qualify for a new mortgage because it will increase your debt to income ratio. You’re better off trying some of the other divorce mortgage options below.

we are moving

Sell the House

One of the easiest ways to remove your liability from the mortgage when getting divorced is by selling the marital home. The proceeds from the sale will first be used to pay off the existing mortgage, and anything that is left over after closing costs can then be split between you and your spouse. Generally, it’s a good idea to sell the house before your divorce is finalized to prevent future opportunities to fight over the sales price. Plus, neither of you will have to worry about the other not making mortgage payments, maintaining the house, or paying taxes and insurance.

One Spouse Keeps the Home and Refinances the Mortgage

This is a common strategy when one spouse wants to keep the home. In this situation, the spouse who wants the house generally buys out the other spouse’s equity share and refinances the mortgage into his or her own name. If you’ll be keeping the house, it is important to have your spouse sign a quit claim deed which relinquishes his ownership and rights to the property.

If your spouse is the one who will be keeping the home, it is very important that the mortgage be refinanced in his name only. As long as your name remains on the mortgage, you will continue to be liable for the mortgage payments should your ex default on the loan.

If your divorce is not yet finalized and your ex will be keeping the home, it’s a good idea to include language in your divorce decree that your spouse will refinance the home. Along with this, you should also have your spouse sign a Deed of Trust to Secure Assumption. This gives you the right to foreclose and take back ownership of the house if he fails to refinance and subsequently defaults on the mortgage. After your divorce papers are signed and everything is finalized, you need to notify the mortgage lender of your security interest and request that they notify you at your current address of any missed payments.

One Spouse Keeps the Home and Assumes the Mortgage

A divorce mortgage assumption can be a good option if your bank will approve it, but you should realize that not all mortgages are assumable. Therefore, the first thing to do is to contact your mortgage lender to see if they will allow you to assume the loan.

If the mortgage lender will let you assume the loan, you begin the process by filling out the assumption agreement and a release of liability. The lender will also need documentation to determine if you can pay the mortgage based solely on your own income. If you meet the lenders underwriting guidelines, you may also need to furnish a copy of the quit claim deed as well as a copy of your divorce decree. If the assumption is approved, the lender generally executes a release of liability to the other spouse.

This can be a good option if your bank will allow the assumption and you have good terms on your existing mortgage. Even though there are assumption fees, they are usually much less than what it would cost to refinance the mortgage.

Copied from WomansDivorce.com. Read more at: http://www.womansdivorce.com/divorce-mortgage.html#ixzz3xuOJ83nj

There you have it folks, a cheat sheet for your options when it comes to your divorce and real estate. I’d like to thank Jim Barker again for this information. If you’d like to contact Jim to learn more about your mortgage options, you can reach him at 602-686-1885, JBarker@spfcnet.com or click here for more information. As always you can reach me at Caily@CailySellsAZ.com or through my website.  

 

Categories: Real Estate

Divorce and Real Estate – Don’t be Dumb!

Let me start by saying, I am not an attorney, nor do I pretend to be one, but I do know a thing about divorce, real estate and being dumb. I am a real estate expert and I spent years wading through my own messy divorce and the aftermath, so I’d like to pass on a thing or two that I learned in the process. Take or leave my advice, there are a few things I wish someone would have told me, now I am telling you.

 

  •       First things first, get a good lawyer. Seems obvious right? I am not sure we are on the same page yet. When I say get a good lawyer, I don’t mean the pit bull who will take your ex for all they are worth, or the lawyer who will stroke your hair while you sob. Get yourself a fair minded, reasonable attorney who will give you logical advice. Ask around, read online reviews. The attorney on the other side of my situation was mean as a snake, continually (to this day) assonates my character and drug our case to the bitter end, causing us both to waste tens of thousands of dollars to get to the logical outcome we expected in the first place. When I looked at his online reviews, they were very poor and reflected the experiences I had. (and no, I didn’t review him online, although I was tempted) Had my ex taken the time to research this man, he would have seen that he has twice been put on probation by the state bar in the last few years for unethical behavior, and hopefully chosen more carefully. The attorneys you both choose will determine the ease of your settlement, choose the logical, fair attorney, not the one who just wants to ring the cash register fighting with the other side.

 

  •         Next, make smart choices not emotional ones.

One piece of advice I received from my attorney was this…

If you are the one moving out of the family home, take half of the stuff, don’t leave it so that the kids will be more comfortable, they need  to be comfortable at your house too.

This was great advice. The kids, if you have them, need some familiarity at both houses. In the same vein, lets talk property. In my case, though I liked the home we bought when married, my ex was adamant that he keep the home, and frankly, I could not have afforded it as a single parent, so I agreed. Now its all well and good up to here, this is the point I went wrong. Don’t be like me, do not do this. I agreed to allow my ex two and a half years to refi the house and get my name off of it. Why so long? No reason really, that’s what he wanted,  I was exhausted and tired of fighting so I agreed. Dumb. So dumb. Guess what? Two and a half years later, he did not hold up his end of the deal. The house has not been refinanced. That means, my credit is at his mercy. It also means that I can not qualify to purchase a car, my own home (there are a few lenders who can help somewhat with options here) or get personal credit regardless of my good credit score. My name on the house means my debt to income ratio is seriously out of wack. Doesn’t he have to comply? Eh. Didn’t we make this deal legally and through the court system? Yep. So now what? Well, I hire an attorney, get a hearing with a judge (which takes months), spend thousands more to get him to comply with a deal he is already legally obligated to comply with. Is it fair? No. Is it just the way it is? Yes, and its not worth ranting over, instead just avoid the mistake.

  •       Lets avoid any dumb real estate moves that also impact you for years after your divorce is final. You do have some other options here. One would be to sell the house, I am sure it’s not popular but neither is divorce. In my case the house would have been underwater and a short sale may have been the remedy. There is an obvious credit impact, though it would have been about a 2 year impact, which would have been shorter than what I agreed to and I would have been done with it. Another option is to allow a much shorter window. You may land back in court forcing compliance, but at least the time your credit is held up in a hostage situation is much shorter. My best advice is to make it a clean break. I know that the number one issue most parents struggle with is the kids and the impact the divorce has on them. In my own experience, moving was not traumatic for them, and though I am not a psychologist, I think getting everything over and done with on the front end would have been better for them all around. Their parents heading back to court, though we try very hard to shield them from it, is not awesome.
  •       My last piece of advice, take the high road. You never regret speaking respectfully about your ex to your children and they will always be grateful for it. No matter how much of a stinker that other person is, don’t trash them publicly, it will never reflect well on you. Someone once recommended a journal to me, for every single angry thing I wanted to say to and about the other person. Write it all down, as venomous as you need to be and then toss it, burn it, whatever.

 

Bottom line, divorce is rough stuff no matter how you slice it, but making fewer emotional choices and more logical ones, will save you some heartburn in the end. For more information about me and Caily Sells AZ, please vist my website!

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Categories: Real Estate