This is the second contribution from local mortgage professional and licensed realtor Natalie DeLeo
. In this guest post, Natalie points out three things to consider when you are selling or refinancing your marital home in the divorce context.
1. How do the terms "upside down" or "underwater" play into your decisions relative to your marital home
Lower property values can affect your decision on what to do
about your martial home. For many people, the marital home is the largest asset they own. Most couples cannot afford to own and operate two households: the soon-to-be former marital home, plus
another home that one spouse moves into during the separation process that is divorce.
If the value of your marital home is less than the mortgage that is owed on it, selling the home
will, in many circumstances, take much longer than a standard sale. This is because you are in
a “short sale” position. Sometimes, short sales can take up to one year to obtain the necessary approvals from the mortgage lender; a second mortgage further complicates [and delays] the process.
You could be in the marital home longer than you think. Therefore, it is imperative that you plan to maintain the marital home as long as necessary to preserve the value. If you find yourself in this situation, you need to hire a realtor that is a short sale real estate expert to broker your sale.
If you or your soon-to-be-ex-spouse are not selling the home, then how do you must determine the equity or value of the home in this down market. With home values bottoming out, there is less equity to distribute
between the spouses. Sometimes debt is apportioned rather than equity being divided.
Some couples have considered maintaining a joint ownership of the home post-divorce [i.e. ownership as tenants in common, without rights of survivorship]. Their hope is that the real estate market will significantly rebound someday and both spouses can share in the net proceeds from the sale of the former marital home. Check with your divorce lawyer about protecting your interest should you both decide
to retain the marital home.
The mortgage economic crisis also has made it more difficult to
refinance a mortgage to make payments more affordable for the spouse
retaining a marital home. There are only two ways to remove a spouse from the
liability of the martial home.
- Sell the home
if it is not upside down.
- Refinance the
home into the spouse’s name that is retaining the home.
Most homes in an "underwater" or "upside down" position will not have an available refinance option. Contact a mortgage professional to find out about all the refinance plans to determine whether you qualify for any. When doing so, be prepared to disclose whether you will be receiving [or paying alimony] or whether you can take advantage of a co-signor to get the deal done.
2. What to consider when selling the marital home.
If you have determined that your home is not upside down and
there is equity then you will have to have a licensed real estate appraiser determine the
current value of home. There are many different formulas to determine the
value of your home. Ask your divorce lawyer for an explanation and a referral to get your home appraised.
Each appraiser has their own opinion of what your home is worth; these opinions could be quite disparate. Your
attorney will guide you through the process of how the home will be sold and
assets distributed. Your realtor can help market the home so that you can get
the best price for the current market.
Your divorce attorney will have input about how to determine
the value of the marital real estate; how the property will be marketed; and the timeline of a potential sale. The goal in each case is to solicit a viable offer and to process the offer so that the home can be sold and closed in a manner that makes sense within the divorce framework.
3. Potential Problems when refinancing your Marital Home.
In the divorce context, the biggest problems arise when one spouse receives the
home and agrees to refinance to remove the other spouse's name from
the mortgage note. In these tough economic times, couples are faced with: the lower average home values and tightened guidelines to qualify for a refinance transaction. Sometimes, no matter how hard a spouse tries to refinance the home, they find they simply cannot close the deal.
The spouse vacating the marital home is often required to execute a quit claim deed in favor
of the spouse who receives the home. Keep
in mind when executing a deed that transfers 100% of your interest that it may be impossible for your former spouse to refinance.
Or worse, we have seen where the
spouse who remains in the home stops paying the mortgage and the home goes into
foreclosure, with the missed payments and foreclosure proceedings appearing on the
innocent spouse's credit report. Keep this in mind when making decisions relative to the marital home in your divorce proceeding.
If possible, get the issues worked out before the divorce is
complete. At least know that the spouse who is trying to refinance is a qualified candidate for the mortgage and has secured pre-approved before the judgment of divorce is executed. Your divorce lawyer can put stipulations that the closing and disbursement can take place
within so many [weeks or months] of the entry of your judgment of divorce.
The key is to prepare and think through all the options
first, then direct your attorney to go out and negotiate your interests. Understanding and working through your particular situation and creating
a plan with your attorney and his experts will give you peace of mind.
Call Natalie DeLeo
Mortgage Consultant-on “The Cauley Team” NMLS LO# 138228 Mortgage Resource Plus
111 S. Old Woodward Suite
Office: 248-642-4600 Ext. 110. or Email Natalie@mrploan.com
Labels: attorney, divorce, lawyer, mortgage, real estate, real estate appraiser, short sale, tenants in common, underwater, upside down