Selling or Refinancing Your Marital Home During Divorce

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 205 Birmingham MI 48009Office: 248-642-4600 Ext. 110. or Email Natalie@mrploan.com

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Posted in: attorney,divorce,lawyer,mortgage,real estate,real estate appraiser,short sale,tenants in common,underwater,upside down

New Social Class Division: Married vs Single Parent

We here at the Law Blogger are truly amazed at how often the New York Times carries above-the-fold front page stories that involve families from our neck of the woods.  The latest example is a story in last Sunday's NYT that proposed an entirely new social classification, not based on race or gender, but on one's marital status.

The premise of the article is that a correlation exists between one's net worth and one's marital status, particularly among women; married two-parent households tend to do better economically than single parent households.

Beyond just stating the obvious, the article profiled two local families: a married couple located in Livingston County, and a single mother living in Ann Arbor.  The NYT cited to statistics suggesting a rapid growth in single-parent households.

What struck us as relevant in the article is the nearly explosive growth of single-parent households.  Once reserved for the "bottom quadrant" of the lower class, single-parent households have experienced the most growth in the second quadrant, among the so-called "working class".

Jason DeParl's article detailed the child rearing advantages of a two-parent household, not just from the standpoint of two incomes, but also from a time and availability perspective.  DeParl sites to statistics that show the long range benefits gained by children raised in a two parent household.  These include better average education and higher self esteem.

By the end of the article, I felt truly sorry for the children of the single mother in Ann Arbor.  That mom struggled to make ends meet and to provide basic extra curricular opportunities for her children.  The married Livingston County couple, on the other hand, used their dual incomes to provide their children with a host of enriching activities in which both parents participated.

The trend cited in the article is that the wealthier among us are more inclined to embark upon building a family under traditional means: marriage, with both parents contributing to the economic and social development of the children.  For the less wealthy among us, single-parenthood looms as a growing specter, with the promise of begetting more single-parent households, as the children born into these arrangements tend to eschew traditional marriage, and embrace the same living arrangement as the parent who raised them.

The article draws no conclusions about our ever-present high rate of divorce and is silent as to how divorce affects the long-term health of family members, particularly children.  We here at the Law Blogger believe divorce is perhaps the most significant factor in one's marital status.

As a caveat to this thesis, Mr. DeParl does point out, however, that 2 of our last 3 presidents came from single-parent households.

Go figure.

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Posted in: Ann Arbor,divorce,Jason DeParl,Livingston County,marriage,New York Times,single parent

SCOTUS Ends Term With Historic Decisions

Chief Justice John Roberts

On the penultimate business day in June, the United States Supreme Court concluded its term with the announcement of its historic decision in National Federation of Independent Business v Sebelius; the Obamacare case that tested the constitutionality of the Affordable Care Act.  As unlikely a jurist as could be found, a visibly uncomfortable Chief Justice John Roberts, announced that Obamacare was upheld in a 5-4 opinion that he authored.

The ACA was upheld on the somewhat questionable grounds of Congress' power to levy a tax.  More than a few legal scholars characterize the so-called "individual mandate" requiring individuals to secure health insurance or pay a penalty, as Congress levying a punishment, not a tax.  The consensus among these same scholars, however, is that challenging the constitutionality of the ACA was a colossal waste of time; legislation of this nature has routinely passed constitutional muster dating back to the social programs of the 1930s.

We here at the Law Blogger cannot wait for the contribution from our guest blogger, Professor Robert Sedler, to weigh in on this decision.  Stay tuned for that.

Here is a summary of some of the more significant decisions issued by SCOTUS this term:

• Churches are entitled to a "ministerial exception" to their adherence to state and federal employment laws, enabling them to hire whomever they want to stand at the pulpit; the remaining question in this case is how deep into the employee roster this ministerial exception goes.

• Police must secure a warrant, as required under the 4th Amendment's "search and seizure" clause, prior to attaching a GPS tracking device on a vehicle.

• Corporations and unions can spend unlimited amounts of money on political campaigns as the Court upheld it's game-changing Citizens United decision and applied it to a Montana law.

• An accused has a right to the effective assistance of legal counsel under the Sixth Amendment during the criminal plea-bargaining process.

• The prosecutor's expert witness may discuss laboratory test results [usually involving blood samples and DNA] without the live testimony of lab analysis that assisted in processing the sample, and this does not violate the "confrontation clause" of the Fifth Amendment.

• State criminal laws that require that a juvenile convicted of murder be sentenced to life in prison without the possibility of parole are unconstitutional.

The justices will reconvene for the 2012-2013 term in October.  Must be nice to be one of nine justices on the High Court.  After deciding such weighty decisions that affect our lives, you really get to enjoy your summer!

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Posted in: Chief Justice John Roberts,Fifth Amendment.,Fourth Amendment,Law Professor Robert Sedler,SCOTUS,Sixth Amendment