Continued from “D-I-V-O-R-C-E and Real Estate, Part 1”.
In order to protect themselves, their financial future and the financial future of any children, divorcing spouses desperately need to make sure they know what they owe (individually AND jointly), what they own (individually AND jointly), what each of them are getting into, what each of them are getting out of, and most importantly – what each of them may be getting stuck with… before it’s too late!
Note: In divorce, too late often comes early.
Remember the appraisal(s) the spouses relied upon to determine the value of the home? Usually this is the ONLY Due Diligence recommended by divorce attorneys or thought of by the divorcing spouses. Have you ever read the disclaimers contained in an appraisal? The appraiser states in no uncertain terms that the appraisal does NOT reveal title issues (tax liens, HOA liens, legal judgments, etc.) or marketability issues regarding the property. Furthermore, there are disclaimers that the appraisal does NOT reflect condition issues which are hidden, such as termite damage, mold, structural issues, etc. Would title issues, liens and/or condition issues affect the true value of the home? Absolutely!
Major mistakes concerning real estate are preventable during a divorce but are not fixable after a divorce. When I learned this at a recent educational meeting for family law judges, this information came as a shock to me. Unless an ex-spouse is in contempt of the divorce agreement, the divorce cannot be “re-opened” and resettled to even out mistakes. These mistakes often result in damaged credit, mortgage default, foreclosure or even bankruptcy. Mistakes that ruin finances, families and futures – for years after divorce. None of these things are good for children, are they?
Because such financially critical mistakes are preventable but not fixable, a solution is simply MORE and EARLIER: More due diligence and information from more real estate and financial experts much earlier in a divorce process.
First suggestion – Search the title of the family home. Title searches can be performed for relatively small expense by attorneys, especially real estate attorneys. If money is a problem, this can be done FREE since soon-to-be-ex-spouses can go to the county courthouse and find this information. Is there a mortgage owed on the house? Did one spouse, unbeknownst to the other, open a HELOC (Home Equity Line of Credit) and use it? Did one spouse take out a second or third mortgage without the other spouse’s knowledge or consent? Did he/she use the house as collateral for a business loan? For a car loan? For a personal loan? Did he/she claim to have paid for remodeling or repair work but really didn’t (mechanic’s and materialman’s liens)? Are there any IRS or Georgia Department of Revenue liens? Have the property taxes been paid? Have the HOA fees been paid? Are there any judgments against either spouse the other may not know about?
Second suggestion – Research any recent or planned zoning, land use or community changes which may negatively impact the value or desirability of the home. Are the woods behind the home soon to be leveled for a new subdivision or shopping center? Is the home about to be redistricted to a less desirable school? Has the HOA gone belly up and quit maintaining the neighborhood amenities?
Each of the above items reduces the “value” of the marital home.
To be continued in Part 3.