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The House: Yesterday’s Asset is Today’s Liability

Posted by Gerald Williams 
· October 8, 2008 
· 2 Comments

In a divorce, when Spouse A leaves the marital homestead in the hands of Spouse B, typically Spouse B must buy out the marital interest of Spouse A.  At least, that is how things used to be, before the current era of the depressed housing market.  Today, it is not unusual for Spouse A to leave the house behind,and not to be bought out by Spouse B at all.  The departing spouse is likely to be only too happy to leave the mortgage payment behind as well, and to get out from underneath the burden of a big house payment and shrinking home equity.  

If a family is struggling in this economy to stay current on a hefty house payment, that concern grows exponentially in the midst of a divorce.  It has always been difficult to support the two individual households of a separated couple on the same income as before the separation.  Add to that the fact that home values that are not appreciating, and it is nearly impossible for a family to stay afloat financially.  

Selling the house tends to be an even drearier prospect.  One is likely to lose money on the sale, with so many families encumbered by a second mortgage or home equity line of credit.  Renting typically costs the same, or more, than a house payment.  Most importantly, it is a very bad time to market a residential property without the home being "priced to sell."  Most financial planners will suggest that someone stay put where they are, and ride out the bad housing market (which could take years).  

If a divorcing couple sees fit to sell the marital homestead in this unfriendly market, it is likely an effort to tap into the opportunity to purchase a downsized residence.  The upside of a bad market for selling, after all, is a good market for buying.

For now, and for the next few years, breaking even on one's home equity is the best that most divorcing couples can hope for.   These sobering realities, and realistic expectations, will carry the day until the housing market recovers.   

2 Comments
Categories : Divorce, General Family Law
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Comments

  1. Theresa says:
    February 12, 2009 at 2:57 pm

    Spouse A left the marital property. Spouse B said come get your stuff out of here. Spouse A said I’m too busy, I’ll get it later. Spouse B said, at month-end I’m changing the locks. You can still get your stuff, but will need to let me know and I will grant you access.
    Spouse A said you can’t change the locks, I have one year to get my stuff.
    I couldn’t find a statute covering this. If Spouse A has abandoned the residence, can Spouse B change the locks?
    If Spouse B can change the locks, and is not depriving Spouse A from gathering personal belongings, just requesting that SB be made aware of the visit so SB can grant access to SA, is it unlawful?
    Must SB leave the marital locks on the home for one year so SA can collect belongings at will?

    Reply
  2. Jan r says:
    June 7, 2009 at 9:22 pm

    I would like to propose to my husband who left the house and the mortgage/household maintenance to me (I make less than 50% of his salary) that he just leave the house to me…I paid for the down payment with my inheritance (20%) and I’ve been paying the mortgage/utilities/maintenance for 10 months.
    House is assessed at $277,000..we paid $160,000
    I paid 20% down payment – now worth $57,000.
    I paid $6,000 of principal since the separation.
    I now owe $85,000 in principal.
    Is this reasonable? I don’t want to sell right now due to the market and the instability of my situation right now.

    Reply

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