D-I-V-O-R-C-E and Real Estate, Part 1

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Considering a divorce? Already involved in a divorce? Know anyone involved in or considering a divorce? Does the divorcing couple own a home or other real estate? If so, read on to learn about divorcing the house as well as the spouse.

In Georgia, the overwhelming majority of divorcing couples try to “settle” the division of property before going before the judge. Usually neither has an attorney, although they may have used the services of a mediator or “collaborative practitioner” to arrive at their agreement. The property agreement is ratified by the judge who has no choice but to believe that each of the parties know and understand what they have agreed to. In fact, the judge’s primary concern centers on any children involved in the divorce. Real estate and other property assets take a distant back seat to the welfare of children, and rightly so.

Often the family home becomes important in figuring out what’s best for the children. Will the children have a place to live? Will they be able to continue at the same schools and be near their friends? “Keeping the family home” is seen as important in minimizing disruption to the children’s lives. So one spouse often becomes the “in-spouse” remaining in the family home with the children and the other becomes the “out-spouse” (not to be confused with “outhouse”). 

How do the in-spouse and the out-spouse decide who will make the monthly payments and pay the insurance and taxes on the family home? How do they decide who would “get” the home? 

The family home is often the most valuable financial asset in the marriage. Sadly, very little “due diligence” is done by either the in-spouse or the out-spouse to make sure that the family home is accurately and completely dealt with in the divorce decree. Pretty much all that is ever done is to get an appraisal (or two) and subtract the amount of the mortgage owed to come up with the “equity”. Equity becomes a financial asset to be divided between the spouses. The in-spouse often gives up claim to other financial assets, such as pensions or investments, in exchange for the perceived equity of the family home.

Here’s a revelation: DIVORCE INCLUDING REAL ESTATE IS A REAL ESTATE TRANSACTION. There is a “buyer” (the spouse agreeing to take financial responsibility for the house) and a “seller” (the spouse being released from any financial responsibility for the house). THIS IS A HIGHLY EMOTIONAL REAL ESTATE TRANSACTION IN WHICH NEITHER PARTY HAS ANY REAL ESTATE REPRESENTATION WHATSOEVER. In fact, this is a real estate transaction in which neither party even has any legal representation, since most divorces are done without either party hiring an attorney. 

The buyer-spouse (usually, but not always the in-spouse) is purchasing real estate without performing even the minimum Due Diligence any prudent buyer would perform. Before agreeing to “take” the house, did the buyer-spouse conduct a title search? Check for liens against the property? Hire a home inspector? Have a termite inspection done? Get mortgage counseling to determine the exact ramifications of becoming the sole owner of the home? Did the seller-spouse (usually, but not always the out-spouse) get mortgage counseling to learn the exact ramifications of signing that Quit Claim Deed?

To be continued in Part 2…

Read the Entire Series
Divorce and Real Estate - Part 1
Divorce and Real Estate - Part 2
Divorce and Real Estate - Part 3
Divorce and Real Estate - Part 4 
Divorce and Real Estate - Part 5 
Divorce and Real Estate - Finale

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14 Responses to “D-I-V-O-R-C-E and Real Estate, Part 1”

  1. Michelle Foster Says:

    Wow, great points and great information! I look forward to hearing more and sharing with potential clients/clients and possibly using for a source of new leads.

    • ann bone Says:

      Yes! Divorcing spouses who own real estate desperately need sage representation!
      Keep reading. There’s a lot of specific Due Diligence we Realtors can help with.

  2. John Baker Says:

    Unfortunately, Divorce cases can be a source of good business as a Real Estate Professional. The couples will need to sell that home, and usually at least one of the spouses will need to buy another home. Just keep your records straight, work good for both parties and be aware there may be times when you may have to appear as an expert witness in a divorce proceeding as I have been subpoena’d for an updated divorce agreement tomorrow for past clients.

  3. Natkia Thomas Says:

    Wonderful information to have! Looking forward to part 2.

  4. Philip S. Coe Says:

    Ann: Your observations are dead-on. (And I speak from some experience – I am a licensed real estate agent, but also a practicing divorce attorney here in Fayette County.) If more divorcing couples actually treated the issue of disposition of the marital home like an arms-length purchase and sale of real estate (which it truly is), they would likely avoid a lot of headaches down the road.

    • ann bone Says:

      Thanks for the confirmation from the divorce attorney perspective.

      Do you think that divorce attorneys may feel increased need to work with Realtors, inspectors and mortgage counselors to protect themselves from potential claims of “you got me a legal divorce, but I’m not financially divorced!”?

  5. Anne Langley Says:

    Very timely Ann. I am working with a client now who is getting a divorce.

  6. Dottie Wise Says:

    Thanks Ann, just last week I did the market research and analysis for a couple whose home is part of their divorce settlement. Their attorneys took the detailed report to the arbitration. From the information provided, the couple came to an agreement on the sale. Will be listing the house, selling another and just helped with the leasing of one! It is a source of business, but approach it with knowledge and caution.

    • ann bone Says:

      Very good! Hopefully the attorneys also did some of the other Due Diligence I’ll be talking about in the following parts of this blog…

  7. Doris Ford Says:

    Excellent information for any real estate profession to have. This situation is definitely one of the most difficult to work with. I look forward to receiving the next part in this series. Thanks for sharing.
    Doris Ford

  8. Linda Gregory Says:

    Ann-
    As always, you have given us more useful information. One of my clients is in the middle of a divorce and this will be most helpful. Looking forward to next article. Thank you for all your help.

  9. D-I-V-O-R-C-E and Real Estate, Part 2 « Metro Brokers Blog Says:

    […] Metro Brokers Blog News and info on Atlanta real estate and north Georgia real estate from the experts at Better Homes and Gardens Real Estate Metro Brokers « D-I-V-O-R-C-E and Real Estate, Part 1 […]

  10. D-I-V-O-R-C-E and Real Estate, Part 2 | Atlanta Better Homes by Realtor Ken Carr Says:

    […] Continued from “D-I-V-O-R-C-E and Real Estate, Part 1”. […]

  11. Bridgette L. Freeman Says:

    What a timely article, as divorces are occuring in record numbers. It helps to be knowledgeable on the subject matter to better handle the transcation. Athough it is still a cow pie, being prepared means the smell won’t take your breath away! It’s a happy stinch. Is that a paradox?

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