NEW: Divorce and Real Estate Issues

For a couple contemplating divorce, their home is often their largest asset.  Even in the current economic climate, with home values decreasing significantly, many couples anticipating divorce have more equity in their home than they do in their brokerage or savings accounts.  Not surprisingly, the disposition of a couple’s home can be a troublesome issue in divorce negotiations.

Attorney Vicki Volper was interviewed by real estate broker Ann Meyerson on her cable television show Real Estate Forum: Divorce Mediation & the Sale Process.  You can see a webcast of this program at http://vimeo.com/5534262.  Following are some of the issues discussed on the program.

Should the home be sold in divorce?

Some couples are willing to continue to jointly own their home after their divorce in anticipation of the market rising in the near future.  Others simply cannot afford to do so.  This is especially the case where there is not enough income for the divorced spouses to support both their marital residence and a home for the spouse who is moving out. 

 

 

Should the home be refinanced in divorce?

Some couples solve the problem of dividing the value of the house without selling it by borrowing against the house and having the spouse leaving the home use the funds for a down payment on a new home.  That is workable when there is sufficient equity in the house to take such a loan.  There also has to be enough income to make the payments on the loan on a timely basis.  Upon the later sale of the home, the mortgage will need to be paid off before division of any remaining proceeds.  There is always the risk that the home will further decline in value.  In that case, the spouse who borrowed the money for a new home will have received equity that may not exist for the spouse who stayed in the home.

 

Should a couple be jointly liable on a mortgage after divorce? 

In some divorces, one spouse remains in the home and the other spouse continues to pay the mortgage.  Many times a spouse fears that the mortgage will not be paid in a timely fashion, risking losing the house to the bank in foreclosure.  A couple can safeguard against such eventuality by requesting copies of the monthly statements from the mortgage company.  The divorce agreement should also provide that one spouse can make payments on the mortgage if the other one fails to do so, and also include a provision indemnifying the spouse making such payments against loss.

While it may be economically inadvisable to sell a house in a down market, many couples going through a divorce have no choice but to sell.  Where the home is the only asset of value, it is not possible to divide the assets by giving one spouse the house and the other spouse assets of comparable value…there aren’t any.