A House Divided: Strategies to ponder If you’re planning to divvy up your properties
They say breaking up is hard to do. But it’s even harder when a couple seeking a split own a home. As a house obviously can’t be physically divided up 50/50 Solomon-style, it’s important to know what to expect regarding real estate matters during and following a divorce, say the experts. Your goal is to come to a mutual agreement with your spouse on how divvy up your assets, including your house, without having to go to court, which can be messy and expensive and result in one or both parties feeling shortchanged.
In the beginning of the process, David Bulitt, an attorney with Joseph Greenwald and Laake in Rockville, Maryland, recommends that each party should: Make a list of any real property (for example, the principal residence plus any vacation homes) that they and/or their spouse own. Determine whether your real property is:
Marital, meaning it was acquired by one or both parties during the marriage
Non-marital, meaning the property was brought into the marriage by one party or acquired through gift or inheritance Potentially a sort of hybrid, for example, if one spouse “gifted” the home to the other during marriage.
Locate the deed to these properties to learn how these properties are titled.
Gather any paperwork concerning loans --- mortgage, home equity, etc., to review whose names are attached to the debt.
Next, it must be determined if the home will be sold or if one party wants to remain in the home, if able to. With the former option, if the home has a mortgage, monies from any equity accrued are usually split up equally after the home is sold and the lender is paid off. With the latter option, the spouse that remains usually has to buy out the other partner’s equity share, assume the mortgage (commonly done via a refinance), and then have the title signed over to him/her.
”If the party who wants to stay in the home cannot afford to refinance, special factors need to be considered,” says Rebecca Zung, a Naples, Florida, attorney. “That person can agree to be solely responsible for the mortgage payments, execute a hold harmless clause, and indemnify the other person if they don’t make the payments. This way, if the first party defaults on payments, the second party has the option of making the payments and thus can preserve his or her credit rating and not have to worry about the bank coming after him or her and will have recourse to get reimbursed from the defaulting party.”
Nathan Embrey, a real estate agent with RE/MAX Preferred Group in Cincinnati, notes that if the home is to be sold and there is not enough equity in the home to pay off the mortgage, both parties may want to pursue a short sale of the home. ”Lenders consider divorce a valid hardship and will allow a short sale, which can minimize damage to credit and resolve the unsold property issue quicker,” says Embrey.
Other property settlement aspects also will need to be carefully strategized by both parties and their representatives. ”Illustrate all settlement scenarios possible, and include all financial aspects, such as support issues, assets and liabilities including retirement plans, as well as the disposition of the matrimonial home,” says Vickie Adams, a certified financial planner and divorce analyst in San Pedro, California. “These include property equity, tax implications, and market conditions for possible sale, in addition to family living issues. ”Divorce is usually not fair,” Adams adds.
“But once you are armed with all the financial facts, try to take a big picture view regarding your settlement. Decide what is most important to you, let your mediator or lawyer negotiate those items for you, and be prepared to let the rest go.”