It’s very sad when marriages break up. We know when couples decide to get married they have all sorts of hopes and dreams for their future together. Unfortunately, life doesn’t come with a road map for reaching “happily ever after.” Sometimes people just grow apart over time and find that their interests are now quite different.
In real estate, divorces are a pretty common reason for the sale of property. When a couple decides that they can’t live together anymore, they have to decide on a whole host of subjects, including child custody, division of assets, alimony and even who keeps the family dog. Usually this gets worked out between the parties, their lawyers and a judge.
When it comes to property, things can be a little more complicated than they might appear on the surface. It’s pretty straightforward if both parties decide to sell their home and split the proceeds. You list your home for sale, find a buyer and each of you takes your money and possessions and moves to two separate new places.
But things can become much more complicated if one party wants to keep the home. Many times a spouse will want to do that to avoid uprooting the kids who have friends in the neighborhood and attend local schools.
The first question to be resolved is, what’s the house worth? In these scenarios, one person is going to think it’s the best house in the town and worth a fortune while the other person thinks it’s a dilapidated shack hardly worth anything. This is all for posturing to try and get the most out of the settlement. I can’t tell you how many times I’ve heard these remarks.
My advice is to get three appraisals and average them to come up with the best value. I say this because one of the first questions asked by the appraiser is what is the purpose of the appraisal. Each party will try and steer the appraisal toward an end goal of pricing it either too high or too low. With three, you just take the average. This is obviously going to cost more than having just one, but there is a lot at stake, and this protects both people.
Now that you’ve agreed on the value of the home and your divorce is about to be finalized, one person quit claims of ownership to the other person. You think everything is done. Well, I hate to be the bearer of bad news, but your problems could just be starting.
After all, you may have a mortgage and both your names are on the loan. You deeded over your interest in the house to your spouse, but you’re still on the hook for the debt. You might think you are just doing what the judge ordered, but your friendly banker doesn’t care at all about your divorce or what the judge said.
You can formally ask to remove the other party, but more likely the bank will decline to do that as two debtors are better than one. The only way to remove someone is to have the remaining owner qualify for the debt by themselves. Maybe he or she can, but maybe not. Don’t forget your income has just been reduced, and one person may have to pay alimony as an additional expense. It’s likely that neither would qualify for a new loan.
This also poses additional problems for the party relinquishing ownership because that party is saddled with the mortgage debt showing up on credit reports even though the other person is making the payments. This could be an obstacle to buying another home or even getting approved for a rental. This could drag on for years or necessitate more legal fees and court hearings.
So before you agree to deed over your home to your soon-to-be ex-spouse, make sure it’s agreed that the other person will be able to remove you from the debt on the home first. You have the most leverage before the divorce is finalized. You will also know upfront whether this is possible. If not, it seems like the only other option is to sell the property and have a clean break.
Steven Hyman is the broker and owner of Century 21 Sunset Properties. He can be reached at 726-6346 or at www.century21sunset.com