Many years ago, a colleague asked me to observe a workshop that she offered for those who are contemplating or going through divorce called Second Saturday. As the experience came to a close, I was struck with the realization that everyone going through the divorce process will have to make some difficult decisions regarding their housing, as they try to make decisions about how to go from one family, living in one house, to a functional two household unit. Shortly thereafter, I became the only permanent speaker, and continue to work with Second Saturday.
As the founding Director of the Boca Lunch Chapter of the National Association of Divorce Professionals (NADP), during the past four years I have experienced that no matter how deep the anger, sadness, and feelings of loss, it becomes essential to have a solid plan, that is well thought out, and takes into account the new impending reality. The following is a brief synopsis of 10 key tips for good real estate moves through the divorce process:
1. UNDERSTAND THE EMOTIONAL, PSYCHOLOGICAL, & FINANCIAL FACTORS
There is an emotional and psychological component to every real estate transaction, that needs to be balanced with the financial and procedural components so that people can make decisions that are in their best interest. This is magnified when divorce is thrown into the mix.
For most of us, home is at the core of our lives, a reflection of who we are. We begin and end each day there, and there lies many of our deepest emotional connections – both positive and negative. It makes sense that when our home is in jeopardy, we can feel like our world is literally being turned upside-down.
Whether our clients decide to remain in their home or to let it go, it is important to make sure that they understand the emotional ramifications of the decision and help them get support.
Psychologically, we determine what will give our clients the most peace of mind. Do they have positive or negative memories in the home? How might it affect the children, who are already going through so many changes.
When we explore housing options with clients, it is critical that they understand the emotional, psychological, AND financial factors that drive their decisions, so that they can make the best choices.
2. DETERMINE HOW MUCH THE HOUSE IS WORTH
Learn the difference between the appraised value and the market value. The appraised value is often determined by a licensed Appraiser, based primarily upon recent home sales. The market value, determined by an experienced Realtor, will address the marketability of the house, the average days on market, and current market conditions that might affect important financial decisions.
3. SEARCH ALL LIENS AGAINST THE HOUSE
Include first and second mortgages, HOA dues, real estate taxes, and mechanics liens. Research open permits that could affect the ability to sell. One spouse may take out a lien against the property without the knowledge of the other, and this can affect the home as a potential asset or liability.
Once the value of the house has been determined, the next decision is “can our client afford the house?” Understanding housing expenses and cash flow is critical at this stage of the process.
4. CONSIDER ALL THE HOUSING EXPENSES
Basic carrying costs include mortgages, real estate taxes, insurance, and HOA/Condo dues, but there are other monthly housing expenses to be considered, such as electric, water, pool, lawn, cable, telephone, etc. When considering the budget, learn whether the HOA fee covers large expenses, like insurance, cable, water and reserves, or merely covers less significant items.
5. WHEN IT COMES TO MONTHLY EXPENSES LOOK AT THE BIG PICTURE
Our clients have other personal expenses, such as savings for college, camp, extracurricular activities, cars, clothing, vacations and other “luxuries.” A trusted financial professional can help them stay on track with their overall financial goals.
6. BUDGET FOR RESERVES FOR REPAIRS, EMERGENCIES & INCOME TAX
Within months after I finalized my divorce, my house needed a new roof, new air conditioner, new refrigerator, and we had a cracked toilet that resulted in a flood and an insurance claim with a large deductible. This taught me a huge lesson, that I pass along to my clients.
7. FIND OUT IF THEY CAN QUALIFY FOR A MORTGAGE
Whether our clients decide that they want to stay in their current house and refinance so that they can remove their current spouse from the title and mortgage, or they decide to move on and purchase or rent a new home, it is important that they meet with a qualified mortgage broker so that they can discuss realistic options. With the constant changes in the lending industry, it is especially important to have up to date information, prior to making a recommendation or putting together a marital settlement agreement.
8. PRESERVING THE CREDIT/FICO SCORE
The importance of preserving optimal credit cannot be overstated. There are many factors that can impact a credit score, and it is essential to understand the specific do’s and don’ts. A low credit score can wreak havoc on the ability to get a mortgage, buy or lease a car, obtain other types of credit, and even getting a job.
9. HAVE WRITTEN PRIOR AGREEMENTS
Often overlooked, this is one factor with very specific issues during the divorce process. It is not uncommon to have one spouse use negotiations about the house as leverage. Putting additional written prior agreements about price and terms into place can help to avoid this pitfall.
10. LEAVE EXTRA TIME TO PACK AND MOVE
Under the best of circumstances, the process of packing and moving is stressful. When someone is juggling work, family, and the emotional trauma of divorce, the move from the family home can cause extreme distress. We suggest leaving extra time to minimize the panic and make the transition as easy as possible.
Bonus Item: It really does take a village to help a family navigate through the divorce process, with input from a variety of professionals. I work closely with attorneys and other professionals as a consultant to help guide them through the complex transition from one home to two. Once we have gathered all the financial information and weigh the emotional and psychological attachment to the home, we determine what will give our clients the most peace of mind and security.
Either way, the choice is often complex, and it is difficult to sort through the field of information so that they can make an optimal decision based upon real options. No matter what they decide, we know that as a Team, we have helped our clients move through the divorce process! Laurie Dubow