In December, Dallas showed up in the #4 spot on Realtor.com’s list of hottest real estate markets. It moved up one spot from November, when it was ranked at #5. In the latest report, Dallas was outranked by only three other U.S. cities (all of them in California) — San Francisco, San Jose and Vallejo. (See report from Home Buying Institute here.) Houses tend to sell more quickly in these hot markets, compared to other cities across the country. And, stories of first day listing bidding wars are frequently heard around the coffee pot at realtor offices in DFW. So, what does that mean if you are going through a divorce? How do you factor that in to deciding to keep the house, let the other spouse keep the house, or sell it and split the proceeds?
Today I received in the mail a very timely newsletter from John Snell, CDLP about mortgage lending in divorces. He made some very timely points about topics to consider for a spouse who wants to keep the house after the divorce.
1.Why do you want to keep the house after you get divorced?
This question may be difficult to answer for many. For some, one house may be the same as another house — just a place of shelter and functionality. But for others, the home carries many emotional ties. It may have good memories, such as the place where the child took his or her first steps. Or, it may carry negative memories, such as the painful reminder of the broken marriage. Either way, there are many emotional, financial and practical considerations to consider in deciding whether to keep the house.
2.Is your home a good investment (especially in the Dallas real estate market)?
Going through a divorce requires a hard look at your financial interests. Compare the home’s value in the market to the amount owed to determine the net equity. Also, look at the future market trends for your house and your area. Is this a good long-term investment for you? Or, will this prove detrimental to your financial interests over time? A realtor can give you an idea of comparable sales to determine a ballpark value of your home — and they usually do this for free. (Call Realtor Debbie Murray at Dallas Luxury Real Estate if you want to talk about how much your house might be worth.) One unique factor right now is the heat of the Texas real estate market. In a normal market, the considerations of keeping the house may be different. But in this market, the selling factors may present an opportunity to make a different decision if the value of the house is high.
3.What is the condition of the house?
It is a good idea to look at your house the way a buyer would when you are considering whether to keep the house in the divorce. What are the repair issues that need to be addressed? Is the roof in good condition? Is the a/c unit in need of servicing? You should consider having a home inspection done prior to discussing settlement to look at repair issues that would affect the overall value of the home. Use the cost of repairs to negotiate the value of the house downward during the divorce negotiations.
4.Can you afford the home on your own after divorce?
If you were dependent upon your spouse’s income during the marriage to afford the living expenses related to the house, you need to fully examine whether you can afford to keep the house without the spouse in the picture. For many people, divorce negatively affects their financial status. Income usually goes down and expenses go up. If you are unsure about what you can afford or need help putting together a budget, consult with a financial professional for help.
5.Can you qualify to refinance the home to remove the other spouse from the note after divorce?
Although it cannot be forced in a Texas divorce, you will want to consider the option of refinancing the home mortgage if you are going to keep it after divorce. This will put separation from your ex-spouse on all issues. Otherwise, as long as he or she is on the note, that ex-spouse will have the right to inquire about timely payment of the note in the future. You can call a mortgage lender who specializes in divorce situations (like John Snell) to find out more.
For the most part, there is no right or wrong answer to this issue. Each situation is unique and has different positive and negative thoughts to balance. Through the combined advice of your our team of Michelle O'Neil and Michael Wysocki, Dallas, Texas attorneys, your DFW realtor, and your divorce-specialized mortgage lender, and your financial professionals, you can reach an educated and informed decision.