"In determining your own financial future without the security of a second income, you can often forget the importance of budgeting."
In a divorce, assets are laid out on the table to be deliberated on. Many of them are highly contested and create instant conflict, such as money or vehicles. Typically, the family home also is in that category, but there are instances when the family home is the last thing people would want in their divorce.
Much of this idea stems from a financial aspect. Between home insurance, home upkeep, mortgage rates, payments, utilities, and miscellaneous fees, there is a lot that goes into maintaining a household, not to mention that many homes face depreciation over time. Regardless of its practical uses in housing family members and providing stability, it does not change the realities of the cost.
Double to single
According to The Huffington Post, the median price of an existing home in the United States is $188,900, as of 2014. Depending on a variety of factors, it can range at a higher or lower price point. In addition, costs like utilities, insurance rates, and mortgage rates, vary depending on the state that you live in, as well.
Given that a divorce involves the division of all assets and a downgrade from a dual income household to a single income household, many people can no longer afford the family home after a divorce, making acquiring the family home in the process an unattractive prospect that could cost them greatly.
Example of ‘hot potato’
Forbes highlighted the struggles that many divorcing couples face in neither of them wanting to keep the family home, due to the raging costs.
One of the couples that Forbes mentioned attempted to sell their family apartment in Manhattan. The wife wished to list it for $24 million, while the husband wished to price it at $17 million. The significant difference in what the couple was willing to take for the house highlights the financial expectations of attempting to live within a similar income bracket as when the couple was married.
It also highlights the desperation that many primary earners have when attempting to value and sell their major assets. They have to be able to prioritize what they want more: whether they want to sell the house or simply make as much money off of the sale as possible.
Knowledge is power
Another aspect in the valuation is the uncertainty of the market. According to Forbes, appraisal values can often be more than what the market can bear. During these instances, the value of the home itself is uncertain, turning the home itself into a liability.
One of the greater concerns in handling this situation is that if a house is handled incorrectly during a divorce, one or both spouses may be ineligible to qualify for a mortgage, and thus be unable to refinance the marital joint mortgage. They also may be unable to buy a house with a new loan origination for many years, according to The National Association of Realtors’ Realtor Magazine.
There are avenues to turn to that are teaching people how to protect themselves legally and financially through educating people using divorce-specific real estate scenarios. They note that these situations are subject to laws that vary depending on the state.
One of these organizations is called Divorce This House, and they provide training on real property information (RPI) and offer certification to become a real estate collaboration specialist in divorce (RCS-D). Through this training, divorced individuals can properly assess the value of their home during their separation.
The duo that runs this organization, Kelly Lise Murray and Wendy Waselle recommend a pre-home inspection, in case there were maintenance issues that had been put off. They also suggest mortgage counselling and title searches, in order to make sure a soon-to-be ex-spouse or an ex-spouse did not cover up a lien.
In determining your own financial future without the security of a second income, you can often forget the importance of budgeting. With legal fees, living expenses, alimony, child support, and any other fee on the menu, it can all add up and put your financial stability in jeopardy.
When you gain the family home after the assets are divided during a divorce, it can seem impossible to maintain if the finances are in order, and if they are not, valuing your home and selling it for a fair price is a decision that needs to be made with the knowledge and experience to understand what it is worth. This will be your best course of action and help your future financial planning.
Dan Pearce is an Online Editor for Lexicon, focusing on subjects related to the legal services of customers, Cordell & Cordell and Cordell Planning Partners. He has written countless pieces on MensDivorce.com, detailing the plight of men and fathers going through the divorce experience, as well as the issues seniors and their families experience throughout the estate planning journey on ElderCareLaw.com. Mr. Pearce has managed websites and helped create content, such as the Men’s Divorce Newsletter and the YouTube series, “Men’s Divorce Countdown.” He also has been a contributor on both the Men’s Divorce Podcast and ElderTalk with TuckerAllen.
Mr. Pearce assisted in fostering a Cordell Planning Partners practice area specific for Veterans, as they deal with the intricacies of their benefits while planning for the future. He also helped create the Cordell Planning Partners Resource Guide and the Cordell Planning Partners Guide to Alternative Residence Options, specific for seniors with questions regarding their needs and living arrangements.