Tips for keeping the house after divorce

Question: Dear Kari, I am going through a divorce, and I have the chance to keep our family home. Could you please offer me some informed advice? Answer: Thank you for the wise question. There are several aspects to take into consideration when deciding what to do with a home after a divorce. This is whether the home has a large or small amount of equity because there could be legal obligations of both parties. In the event you decide to buy out your spouse, there are important steps to understand. I am going with the assumption the house is in both names and jointly owned with equal partnership. It is typical and easy for one spouse to simply sign a quit claim deed, and everyone be on their merry way. However, when using a quit claim deed, one spouse may sign off the title of the house, removing the right to ownership, but this does not remove the other spouses' loan responsibility. This can be a most dangerous situation, even with the best intentions of all parties involved. Unforeseen problems may arise, equaling a potential mess for the spouse keeping the house. A few examples of potential problems may be if the other spouse cannot make the payments, this can affect the other spouse's credit, and the credit hit could prevent them from being able to buy their own home. Another example could be if a new defect develops with the house down the road and the spouse with the house does not have the funds to make the needed repairs. In addition, there could be a sudden decline in the property's value. The ways to troubleshoot these problems is to either have the spouse keeping the house obtain a new loan or by using a sign-off. Both cases would require the spouse keeping the house to qualify for a new loan on their merit. In addition, it would be wise for the spouse keeping the house to treat the transaction as though they were purchasing the house from a complete stranger. This way, all the costs would be realized and split down the middle, avoiding one spouse from feeling taken advantage of. Let us look at some items that should be considered before starting the process of keeping the house: • Obtain a current title search and insurance, checking for any hidden liens or unknown debts. • Have a pest control/termite inspection and repair any necessary work. • Have a home inspection, allowing for any necessary repairs to be completed. • Purchase a one-year home-warranty policy. • Obtain a current professional appraisal of the house to determine the value. • Be sure not to overlook any tax consequences for both parties. • Review total costs of title/escrow fees and any new lender fees. • It is extremely important to have a second title search on the house completed right before you sign on the dotted line, as things have been known to pop up at the end of the transaction when dealing with divorce. It's good to know a divorce decree does not override any agreement you have with a creditor, no matter which spouse is ordered by the court to pay. Remember before you sign anything, you should contact an attorney, accountant and Realtor, arming yourself with the knowledge to go through this most difficult period. This information is to be used to try to answer this question only. For legal advice contact, a real estate attorney. Kari McCoy owns the Kari McCoy Group at Windermere Real Estate. She can be reached at 916-933-5274, or e-mail her at sold@karimccoygroup.com. #00841588