Home Ownership During & After Divorce
Deciding what to do with your home during a divorce is one of the most dif f icult decisions couples
f ace. Should you sell the home? The answer to that question is going to vary f rom one couple to
the next. It will depend on your f inancial situation as well as your f eelings about the home.
Start by determining how much equity you have in the home. Find out how much you still owe on the
mortgage. Get an experienced Realtor to give you an idea of what the home would bring in the
current market. Will the home sell f or enough to pay of f the mortgage? We have heard stories of
couples continuing to live together just because they had negative equity in their home. If the home
isn’t worth what you owe on the mortgage and neither of you can af f ord the mortgage on your own,
a short sale may be the only way out. As BankRate.com says,
Before the market crashed, divorcing couples could easily sell their homes, split the
equity and purchase other homes for themselves. But times have changed.
Once you know how much equity you have in the home, you’ll have to decide whether to sell or if one
of you will buy the other one out. The person who buys out the other’s interest will have to qualif y
f or a mortgage and cover all the expenses of maintaining the home. Can either of you af f ord the
home on your own? Does either of you want to keep the home?
If one partner can buy the other partner out, this
may be easier f or young children who have grown
up in the home. If you both agree, one partner may
be able to continue living in the home with the
children until they’re older. At that point, the home
can be sold and the proceeds divided.
If there are no children involved, there are
advantages to selling the home. Selling will allow
you both to start your new lif e without having to
live in a home that’s packed with memories. There
may be tax advantages to selling now rather than
later. Married couples who have lived in the home f or 2 out of the past 5 years can make up to
$500K on the home without paying taxes. Read Bill Gassett’s explanation of the capital gains issues
in “Divorce and Selling Real Estate”.
If you decide to sell the home, you should hire a Realtor that you both trust. Remember, the Realtor
didn’t cause the divorce and they don’t decide how the equity you have in the home is split. That
decision is made by the two of you, your attorneys and a judge.
At the end of the process, one or both of you will need to f ind a new home. Renting may be
necessary in the beginning but buying your own home can be a healthy step f orward. Buying your
next home will be easier if you handle your f inances responsibly. Keep your mortgage payments
current while selling the home. Assuming both of you signed on the mortgage, missed and late
payments will damage both of your credit scores.
Keep other shared payments current. We recently
helped a client who had been through a f oreclosure
during her divorce. Three years later, she was
working to rebuild her credit. Lenders weren’t
concerned about the f oreclosure af ter three years.
They checked her credit. Her husband allowed his
leased vehicle to be repo’d. It was his car, but her
name was on the lease. She showed $45K in
collections against her. Lenders didn’t want to work
with her. It took six months of proving that the
collection was against the ex-husband bef ore she
could get a mortgage.
Make sure all shared credit cards are cancelled. The last thing you need is to f ind that your ex ran
your credit card up to the limit and stopped making payments on it.
Yes, Home Ownership After Divorce Is A Good Idea!
Low interest rates and reasonable home prices make it more af f ordable to buy than rent in Las
Vegas. This is true in most of our major housing markets. You may not be ready to commit to
buying a home right away. We do recommend buying sooner rather than later. It may save you tens
of thousands on higher interest rates and home prices in the long run. In addition to investing f or
your f uture, buying your new home is a great way to get on with your lif e.
Debbie Drummond is a top producing Las Vegas Realtor. For inf ormation on buying & selling your
Las Vegas home, call (702)354-6900 or email Debbie@LVHomePro.com.