Joan DeSantis Homes

Divorce is a tough situation which opens up many emotional and financial issues to be solved. One of the most important decisions is what to do about the house.

In the midst of the heavy emotional and financial turmoil, what you need most is some non-emotional, straight-forward, specific answers.  Once you know how a divorce affects your home, your mortgage, and taxes, critical decisions are easier. Neutral, third party information can help you make logical, rather than emotional decisions.

Probably the first decision is whether you want to continue living in the house. Will the familiar surroundings bring you comfort and emotional security, or unpleasant memories? Do you want to minimize change by staying where you are, or sell your home and move to a new place that offers a new start?

Only you can answer these questions, but there will almost certainly be some financial repercussions to your decision process. What can you afford? Can you manage the old house on your new budget? Is refinancing possible? Or is it better to sell and buy? How much house can you buy on your new budget? The purpose of this report is to help you ask the right questions so you can make informed decisions that will be right for your situation.

You have four basic options when in the midst of a divorce:

1.Sell the house now and divide up the proceeds  Your primary consideration under these circumstances is to maximize your property's selling price. As you work to get your financial affairs in order, make sure you understand what your net proceeds will be (after selling expenses) and after determining what your proportional split of the proceeds will be. Note that the split may not be 50/50, but rather may depend on the divorce settlement, the source of the original downpayment, and the property laws in your area.

A note about short sales: Another factor to consider, especially in the current market, is that you may owe more on your mortgage than you will net after selling. This situation is commonly known as a "short sale,"  because the homeowner's mortgage holder must approve the sale and agree to accept less than the balance remaining on the loan. (Some buyers mistakenly think this means the house sells quickly. In fact, quite the opposite is true: "short sales" may take up to 4-6 months from the time an offer is accepted with little assurance that your mortgage holder will approve the sale.) Therefore, It is important to find out the market value of your house early on by requesting an in-home market evaluation. This service should be provided free of charge by an experienced real estate professional familiar with your neighborhood.

2. Buy out your spouse  If you intend to keep the house yourself, you'll have to determine how you'll continue to meet your monthly financial obligations, if you now only have one salary. If you used two incomes to qualify for the old loan, refinancing on your own might be a challenge.

3. Have your spouse buy you out  If you are the one who is leaving, you have the opportunity to start again in new surroundings with cash in your pocket. However, be aware that if the old home loan is not refinanced, most lenders will consider both you and your spouse as original co-signers to be liable for the mortgage. This liability may make qualifying for a new mortgage difficult for you if you decide to purchase a home, even thought you won't have legal ownership.

 

4. Retain joint ownership  Some divorcing couples postpone a financial decision with respect to the home and retain joint ownership for a period of time even though only one spouse lives there. While this temporary situation means you have no immediate worries in this regard, keep your eye on tax considerations which may change from the time of your divorce to the time of the ultimate sale. It is still important to find out what your home is worth prior to the divorce using an in-home market evaluation by a knowledgable neighborhood real estate professional.

The material contained in this report is for information only. It is not intended to replace individualized legal advice. Seek professional counsel for legal issues and tax advice.

CopyrightCraig Proctor Productions 1998 - Used by Permission