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Keeping the home during a divorce

By: Kari McCoy
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Question:

Dear Kari,

I have been married for just under 10 years. Much to my surprise, I am getting divorced. My husband says I can keep our home if I buy him out right away.  It appears that he is in a hurry. Can you please tell me if there are disadvantages or traps for me in keeping the home? 

 

Answer:

Thank you for your pertinent question. There are several issues to consider when deciding to keep the home when undergoing a divorce. To begin with find out if the home has a large or small amount of equity. This is important because there could be unforeseen legal obligations of both parties regarding the home. In the event you decide to take the offer to buy out your soon-to-be former husband, there are some vital steps to consider.

I am going with the understanding that the property is in your and your husband’s name jointly. In this situation it is typical for one spouse to simply sign a quit claim deed and everyone be on their merry way. However, when using a quit claim deed one spouse may sign off the title of the property removing the right to ownership, but not the loan responsibility and this can be a dangerous situation. This includes even the best of intentions of both parties involved. Unfortunately, unforeseen problems may arise for the party keeping the house.  

A few examples of potential problems could be if the other spouse cannot make the payments, this can affect the other spouse’s credit. This credit hit could prevent them from being able to buy their next home. Another example of a problem could be if a new defect develops with the property down the road and the spouse with the home does not have the funds to make the needed repairs. Other problems that can affect the value of the home include an unexpected decline in the property's value or just about any other negative impacting factor on the value of the home.  

Let us look at how to troubleshoot the problems in the previous paragraph. Have the spouse with the home obtain a new loan. In addition, it would be wise for the spouse that is considering keeping the home to treat the transaction as though they were purchasing the property from a complete stranger. This way all the costs would be discovered and split down the middle avoiding one spouse from feeling taken advantage of. 

Here is a list of items that need to be considered before starting the process:

  • Have a current title search and insurance checking for any hidden liens or debts.
  • Obtain a pest control/termite inspection and any necessary repairs completed.
  • Have a home inspection allowing for any necessary repairs to be completed.
  • Purchase a one-year home warranty policy.
  • A current professional appraisal of the property.
  • Be sure not to overlook any tax consequences for both parties.
  • Review total costs of title/escrow fees and any new lender fees.
  • Most important of all is to have a second title search completed right before you sign on the dotted line as things have been known to pop up at the end when dealing with divorce.

It is good to know that a divorce decree does not override any agreement you have with a creditor, no matter which spouse is ordered by the court to pay the bill. Remember before you sign anything you should contact an attorney, accountant and a Realtor, arming yourself with the knowledge to go through this most difficult period of your life.

This information is to be used to try to answer this question only, for legal advice contact a reputable real estate attorney.

Kari McCoy owns the Kari McCoy Group, at Lyon Real Estate.  She can be reached at 916-933-5274 or sold@karimccoygroup.com. #00841588