The Benefit of Proper Discovery in Divorce Cases
How many times have you witnessed a divorcing couple arguing and negotiating endlessly over the proceeds of selling their home?? How many times have you witnessed similar arguing and negotiating because one spouse wants to refinance and buh out the other and they can’t agree on the buy-out price and terms??
All too often, those acrimonious negotiations are for naught - because in reality the following may be true..
Perhaps there is little to no equity
The spouse who wants the house can’t qualify for a mortgage loam
Proper initial discovery would reveal exactly what is owed against the house. An early conference with a lender (more specifically a Certified Divorce Lending Professional) would reveal whether or not the buh out is even possible.
Once there is complete Statement of Information allowing the title company to access the sellers records, they will examine the status of the house, looking for things like:
Loan modifications
2nd mortgages
Pace, HERO or other energy loans
Liens - whether from judgments, from the IRS, or from unpaid taxes or assessments
HOA liens
We’ve found that homeowners whose second mortgage was “forgiven” during a loan modification often forget that the money will still be owed upon sale of the house. These second mortgage lenders stop reporting the debt to the credit reporting bureaus, but it does still exist and is owed.
Loan modifications often create yet another debt. The method used to lower the borrower’s payment was to defer a portion of the principal and amortize only the remainder. Some borrowers thought that deferral meant forgiveness of that debt, which it does not. The difference in the actual amount owed and the amount reflected on the loan statement may be significant.
We recommend tat attorneys revise their intake sheets to ask if the divorcing couple has ever done a loan modification, taken out a home equity line of credit, has taken out a solar or other energy efficient type of loan, and if there are any possible liens against the property.
While the couple may feel they have sizable equity in the home, it may cue that once the actual numbers are calculated they may not have enough to pay their attorney fees or real estate professional.
Have questions about real estate in your divorce case? Give us a call to schedule a consultation CDRE