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What You Need to Know About Your Marital Home in Case of Divorce

8 min read
DivorceForce

By DivorceForce
Dec 16, 2020

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Divorce is complicated. Deciding if a marital house is kept or sold adds to stress and financial problems.

DivorceForce had the opportunity to speak with Jonathan Livnat regarding some very important issues regarding the division of assets, as they relate to the marital home. Jonathan is a real estate divorce consultant.

 

Our interview with him follows.

 

DivorceForce: A couple plans on getting divorced. What happens to the house if a.) they cannot afford to keep it or b.) they can afford to keep it?

Jonathan Livnat: If they cannot afford to keep it, then they should sell it. However, if the house is "under water," they should contact their lender, explain the situation and negotiate with the bank to let them "off the hook" for less than what they owe. If the house does have equity, they should figure out what their house's fair market value is and put it up for sale.

I strongly advise to do it before any divorce papers have been signed, so their assets division is based on true and accurate numbers. Many mistakes happen when spouses (and their attorneys) let this step take place after the divorce papers are signed. While the divorce decree describes how it will take place and what penalties each party will bear in case they fail to do their part, it's the unknown factors that spouses (and their attorneys) neglect to take into account, such as: 1.) unseen lines, 2.) changes in flood zones, 3.) insurance claims (executed and unexecuted), 4.) old debts, 5.) changes/issues with the condition of the house, and so forth and so on.

These are issues that divorcing couples face later, which can change the asset division, and not for the better. Now, what are the chances that, after the divorce is over, one ex-spouse will be willing to give back money if things turn up to be different than what both spouses already agreed (and signed) on?

Things get financially complicated, tricky, risky and dangerous when one spouse decides to keep the house. Unfortunately, divorcing couples and the legal system (mediators, family law attorneys and family court judges) treat this situation as if there's nothing to it, but in reality, this is exactly the attitude and lack of knowledge that causes many to make mistakes and end up in foreclosure, bankruptcy, and really low credit score—with all its financial ramifications.

I cannot express enough how financially devastating these mistakes turn out to be, and that in 99.99% of the cases, these mistakes cannot be fixed. The only way to avoid these from the get go and ensure a brighter financial future for both spouses, is to untangle—before any divorce papers have been signed—all their joint financial ties to the house, and any potential knots—known and unknown—their marital home has "acquired" over the years. The only way to do it is by going in reverse—the opposite process to purchasing the house. This is done using a checklist of items to clear, to ensure a smooth and clean process.

The situation is bad among divorcing couples who own a house, who do it on their own, and have no idea of what to be aware of and careful about. It's bad among couples who claim to have a "friendly" divorce, and it's just as bad with couples who hire legal representation.

 

DivorceForce: You speak about a list of marital property that needs to be divided up by working backward on the acquisition of these properties. What do you mean by this?

Jonathan Livnat: I mentioned earlier that when one spouse decides to keep the house, things get tricky and complicated. The best way to describe it is if you ever played Mahjong—a bunch of cubes piled up in some sort of random order. The goal is to work your way down to the last cube by pairing matching cubes and removing them from the pile. The game ends when all the cubes are paired (you win), or when you get stuck and are out of moves (you lose).

The concept behind divorce real estate is that when a couple decides to go separate ways, they should treat their house like that pile of cubes. They should know that it is critical they start untying all their financial ties to the house until they reach the last of them. Unlike the game, mistakes are critical. When mistakes are made in dissolving the marital house, there is almost no way to correct or fix it. 

The only way to avoid this altogether—and make sure there are no mistakes—is by going "in reverse." Reverse means untying all the knots that were made over the years in a top-down fashion. List all the financial risks the marital home contains and how and why they were caused. By following the list, we can make sure all the ties—mortgage, house condition, house's accurate and current market value, title, insurance, joint and individual title-related debts, and more—are checked, addressed, and resolved prior to signing any divorce papers. This is the ultimate way for divorcing couples to protect themselves from horrible financial situations.

 

DivorceForce: You mentioned that Vanderbilt University Law School, led by professor Kelly Murray, a Harvard University law school, launched a program designed to educate family law judges about the issues that the marital home causes when addressed incorrectly. What was the outcome of that program?

Jonathan Livnat: While the scope of the problem among divorcing couples was already known to Prof. Kelly Murray and her staff, it was surveying the family law judges that shed a light on how the legal system addresses the marital home in divorce, and how big the problem really is. The survey exposed how little family law courts really know about the marital home; how little they pay attention to it, and the devastating financial consequences it has on divorcing couples. The survey shed light on how the assets division happens, and if it is at all realistic (based on the information that is presented to the court) to expect that divorcing couples will achieve their goals the way they are described in their divorce decree.

The reality is that there is no state-prescribed divorce real estate guidance for all parties involved to follow. It's not in the judges' job description to explore how and why the couple's divorce decree/asset division is the way that it is. In most states, the judge's job is to make sure the asset division is fair, not equal.

The survey revealed that out of the 11 documents family courts should ask for and be presented with, they actually see—on average—only two. These two documents normally present the material home's market value and the current mortgage balance. Most couples get their house's market value from some online website where the information is inaccurate and not guaranteed. (Feel free to check all these websites' Terms of Use). They all specify that they are not to be held liable in any way, shape or form for the information posted, and even state that the entire risk is on the user. Mortgage balance statement is nothing like the real thing—a payoff statement. Payoff statement includes the current and accurate amount; this might include penalties for overdue payments (if there are any), and any added interest as a result. The amount of the mortgage balance, therefore, may be very different from the payoff statement. The home's market value and the current mortgage balance documents can present a false and incomplete reality, so it's easy to see how problematic they can be—and these are the ones family law courts use the most.

Exposing family court judges to the severity of the situation brought up some interesting insights. One of the judges said, "I've paid only superficial attention to these issues [regarding the marital home], especially with self-represented litigants. They don't have a clue. Now it's clear I didn't know the half of it, nor do almost all the attorneys practicing in front of me."

Prof. Murray was shocked by the lack of information regarding the marital home on the part of divorcing couples, attorneys, and family court judges. And at the same time, serious financial decisions are being made without the real facts available. Prof. Murray decided to offer the program to a wider audience of service providers, such as family law attorneys, real estate agents, lenders, closing/real estate attorneys, insurance agents, etc.

Real estate agents were chosen to spearhead the program. The idea was that real estate professionals who understand the process of buying and selling a house would be specifically trained on how to take the process (in reverse) back to square one. {The course itself is not a part of the real estate license curriculum, and is not taught in any form outside what Prof. Kelly Murray is offering.} The program aims to work in collaboration with other relevant service providers, such as real estate attorneys, family law attorneys, mediators, insurance agents, lenders, credit repair companies, financial advisors, etc. This collaboration is necessary to cover all the documents needed and the information divorcing couples should have before signing any divorce papers, to ensure they make an informed decision.

 

DivorceForce: How do most real estate agents and lawyers treat "the house" in a divorce? What does a couple getting a divorce need to know that most realtors and lawyers do not address?

Jonathan Livnat: My wife and I attended the program at Vanderbilt University a few years back. We are not the only real estate agents in Georgia who took the course (last time I checked, there were about six or eight), but we are the only ones who truly offer the program Prof. Murray intended for real estate agents to offer. It's a lot of work on the part of real estate agents, and there is no immediate compensation, so that's why many shy away from it. Most real estate professionals I know do have relationships with an attorney—or even a judge—but all they do is sell the house if that was the decision made. The real need comes when one spouse wants to keep the house.

The family court judges hands are full. They don't have the time to go over each and every case and make sure the divorcing couple did their due diligence. Judges don't have the time to assess if all the possible aspects of the house were covered. Family court judges don't ask questions like why, or how or what if.

When judges see a divorce decree in front of them, they only want to know the parties agreed on it. And then they will sign on it. The problem with that is that divorcing couples later believe that that signed document (court order/divorce decree) can save them when their lender forecloses on their home. They might also find out there is a tax lien when they are just about to sell the house, which no one knew anything about. They may also find that the insurance company is not going to cover any damages to the house because the insurance was canceled or, for example, there was a change in the flood zone that the house is now in it. 

 

DivorceForce: Any parting words of wisdom for couples getting a divorce as it relates to real estate?

Jonathan Livnat: If you are thinking about getting a divorce, going through a divorce right now, or were just presented with divorce papers and you jointly own a house with your soon-to-be ex-spouse, do research. Go online and search "mortgage and divorce," "divorce and my credit," or "divorce and insurance." Look for "can my ex-spouse do [this or that]." Especially look for "what to do when my ex-spouse does not pay [this or that]" or "what to do when ex-does not pay alimony" and so on and so forth. You will find numerous horror stories people tell after their divorce, including the devastating financial situations they have been through.

You will find many people who thought:
  • their divorce decree protects them
  • a court order solves all their issues
  • the legal system (their attorney included) took care of everything
Many of these people have common scenarios in that:
  • they owned a house jointly with their ex-spouse
  • dealing with the house was poorly handled by them
  • they find themselves in foreclosure and/or bankruptcy
  • their credit is ruined
  • there is no way out of it

 

Don’t be like that. It does not have to happen to you. Whether you go out on your own or hire an attorney, call me or any other real estate professional out there who went through the RCS-D program {Real Estate Collaboration Specialist-Divorce}, get the information you need and the documents you should have handy, so you can make an informed decision and protect your and your children's financial futures.


To learn more about Jonathan Livnat and his practice, visit www.RealEstateDivorceConsulting.com, or email JLivnat@gmail.com .

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