The divorce process is difficult. An issue that can further complicate the divorce process is if what happens to the marital residence and other real property. Foreclosures, real estate sale, and buyouts are a few issues that often arise in a divorce where the parties are joint owners of real estate. Here are a few options to consider:
Foreclosure: After the recession, you may have found yourself behind on mortgage payments and you are now facing a foreclosure on your property. If your home is in foreclosure while the divorce is pending, there are a couple of options. You should consult with your attorney to see whether you are eligible for a short sale or deed-in-lieu of foreclosure.
Short Sale: If the home is under water, meaning that you owe more on the mortgage than what the property is worth, you can sell the house in a short sale. Upon the sale of the home, a deficiency will be created. The deficiency is the difference between the amount owed and the amount that the property sold for in the short sale. Sometimes the lenders will forgive the deficiency. If your deficiency is forgiven, you should consult an attorney to determine the tax implications for the discharged deficiency. Other times, the lender will seek a judgment against you and any other joint debtors for the amount of the deficiency.
Deed In Lieu: Arguably, if your house is not underwater, a deed in lieu of foreclosure may be your best option to prevent the foreclosure. A deed in lieu of foreclosure essentially requires the party to turn over ownership of the property to the lender by signing over the deed in place of the lender filing a foreclosure action to get the deed. Like a short sale, sometimes the lender will want to recover the difference between the fair market value of the property and the amount owed as a deficiency judgment against the parties.
Real Estate Sale: If there is equity in the property, and neither party would like to retain ownership of the property, the parties should consider a sale of the property. The proceeds of the sale of the property can be divided equally or in any way agreed upon by the parties. This option will eliminate a large portion of the marital debt and free the parties of the responsibility for the asset.
Buyout: If you would like to keep the real estate, you could buyout your spouse’s interest. This means that you can pay to your spouse their share of the equity in the home in exchange for you keeping the home and removing the other spouse from title of the same. There are various ways to achieve the buyout.
Refinance: If one spouse who wants to retain the real property and is able to refinance, then that spouse can apply to refinance the mortgage on the property. This means that the spouse will acquire a new loan to pay off the old loan and remove the other party from liability for the new loan. As a result of the refinance, the spouse who is refinancing will often pay to the other spouse their share of the equity for the property.
Loan Modification: If a refinance is not possible, then you should consider a loan modification. A loan modification will allow you to maintain the current mortgage, but you will modify the interest rates and repayment terms, and reduce monthly payments.
Our family law group has experience in dealing with your divorce and the real estate issues that often arise during the divorce proceedings. To schedule a free consultation for our Cook County family law, Will County family law, or DuPage County family law services, call us at 815-600-8950 or contact us online today.
This is a legal advertisement from Sterk Family Law Group. It does not constitute legal advice and should not be construed as such. This article is for informational and educational purposes only.