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  1. #1
    stormyskies is offline Junior Member
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    home equity buyout

    What is the name of your state (only U.S. law)? Arizona
    My husband and I are divorcing, no kids. We have a home, and he wants to keep it. I will move out, but I want him to pay me my equity in the home. I got some estimates as to the homes' value, and I need to sit him down and get him to agree on the value of the house. My question is, how do I put this in the divorce papers? I see only three choices: he gets it, she gets it, or sell it and split the proceeds. He has no money, so he would need to take out a loan or make payments. I also need to outline a payment plan that is reasonable. What should I do?
  2. #2
    seniorjudge is offline Senior Member
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    If you are writing the judgment in the lawsuit, have him ordered to buy you out within 90 days and if he doesn't you can buy him out in 90 days or, all else failing, have the court sell it on the courthouse steps.

    If everybody is agreeable, it shouldn't be too difficult to put exactly what you want in the judgment.

    Just do not leave an open-ended date.

    Google rule against perpetuities.
    There are two rules for success:

    (1) Never tell everything you know.
  3. #3
    nextwife is offline Senior Member
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    I work with bank owned real estate, and sales.

    I find that we need at LEAST two appraisals these days, as appraisals vary wildly, and market comps of just a few months ago are not valid. We are very dubious of many of the appraisal values the appraisers are coming in with, as the market is not bearing out these values when we go to sell. Keep in mind that, ultimately, the lender will not do a buyout loan if they don't agree with the value you assign. I see loan often being turned down for these scenarios because the buyers are over-valuing their homes in the current market. I see your biggest problem to be arriving at a relavent CURRENT market value.
  4. #4
    stormyskies is offline Junior Member
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    Well, it costs $400 for an appraisal, and neither one of us has any money at all. Also, I don't think 90 days is enough time for either one of us to come up with any money. That is, unless he gets a loan. The house was purchased just before all the prices shot up, so it was quite a deal, and has increased in value almost twofold. He wants to keep it mainly because it would cost twice as much as we paid for it to replace it.
    My problem is paperwork-the choices are: he gets it, she gets it, or sell and split. What is the name of the form that I need to put this buyout agreement on? How long of a time should be considered reasonable? We have been married 5 years, and have owned the house for 7.
  5. #5
    LdiJ is offline Senior Member
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    Quote Originally Posted by stormyskies View Post
    Well, it costs $400 for an appraisal, and neither one of us has any money at all. Also, I don't think 90 days is enough time for either one of us to come up with any money. That is, unless he gets a loan. The house was purchased just before all the prices shot up, so it was quite a deal, and has increased in value almost twofold. He wants to keep it mainly because it would cost twice as much as we paid for it to replace it.
    My problem is paperwork-the choices are: he gets it, she gets it, or sell and split. What is the name of the form that I need to put this buyout agreement on? How long of a time should be considered reasonable? We have been married 5 years, and have owned the house for 7.
    Both of you may not be being realistic about this. If you and your husband can't come up with 400.00 for even one appraisal, then how is he possibly going to qualify for enough of a mortgage to both cover the principal balance AND buy out your share of the equity?

    He has to totally refinance the mortgage to remove you from the loan. Otherwise, your credit will be tied up in HIS house. The divorce decree will not help you with that, because the mortgage company is not a party to your divorce, and is bound only by the loan contract.

    If he is serious about wanting to keep the house, then he needs to start applying for mortgages NOW, which will require maybe two appraisals.

    I would not give him more than 90 days to refinance in the divorce decree. If he is actively working on it you can always informally give him extra time. You need to know ASAP whether or not he is going to qualify, because otherwise, you need to sell the home and split the proceeds.
  6. #6
    penelope10 is offline Senior Member
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    Have you checked with your current lender as to what a refi with them would entail?
  7. #7
    MFinancier is offline Member
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    Quote Originally Posted by stormyskies View Post
    Well, it costs $400 for an appraisal, and neither one of us has any money at all. Also, I don't think 90 days is enough time for either one of us to come up with any money. That is, unless he gets a loan. The house was purchased just before all the prices shot up, so it was quite a deal, and has increased in value almost twofold. He wants to keep it mainly because it would cost twice as much as we paid for it to replace it.
    My problem is paperwork-the choices are: he gets it, she gets it, or sell and split. What is the name of the form that I need to put this buyout agreement on? How long of a time should be considered reasonable? We have been married 5 years, and have owned the house for 7.
    Married for 5...owned for 7? Who put up the downpayment? Who paid the mortgage and taxes? Are you positive there are no other assets or debt? No retirement accounts?
    Remember to factor in capital gains taxes if the profit is over 250. You'll need to preserve both your expemptions. Don't forget to pro rate real estate taxes either...and consider normal selling costs.

    Either way...I hate to throw water on your plans but I see many people who want to keep a house they can't afford...and absolutely bury themselves financially. It doesn't sound like he'll be able to refinance...and unsecured marital settlement (buyout) notes are now higher up the food chain in bankruptcies...but the real problem is vanishing income and equity, additional debt and liens, as well as any other unforseen disasters that you have little control over. Quit claiming the deed over to him with an open ended or lenghty buyout option is a very dangerous gamble...hence the advice from senior judge to complete the buyout (in cash that is!!!) within 90 days...or sell the house! Good Luck!
  8. #8
    MFinancier is offline Member
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    One other thing...your marital status for tax purposes is determined on 12/31 of each year...so when you get divorced ...you will be considered single for that whole year. That means you will need to address who gets what deductions for mortgage interest and real estate taxes that were jointly paid the year you get divorced!!! Just remember...good agreements cover as much as possible...bad ones cost more money to fix.
    Last edited by MFinancier; 08-12-2008 at 07:32 PM.
  9. #9
    stormyskies is offline Junior Member
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    Thanks for all the advice everybody-it's getting more complicated by the minute!
    The downpayment was put up by my parents ($3000), but he has put alot of beautiful custom woodwork into the house. We have been splitting the bills 50/50 since we moved in. I have been scrounging for work for most of the year, as we live in a very tourist based area, and no tourists have been here for a long while, putting lots of people out of work. He has a steady job, and I have tried for months to get one. Since all my money ran dry, I decided to let him buy me out of the house, instead of my original plan to get refinanced and buy him out.

    So you're saying that he should refinance the house entirely on his own? I may have to give him some time to get back on his feet to do that. See, I'm willing to wait if it means he gets to keep the house, and I get my proper amount of equity. We are not enemies. No, we don't have even $400 for an appraisal, we are scraping to get by because of my work situation. Believe me, I have interviews every day, trying to get a job just like 35% of the rest of the population in this little town. So I have contributed to his lack of funds for the appraisal, and I am trying to work with him. If he can't get refinanced, he will have to agree to make reasonable payments to me. Do we need to know this before we put the agreement into the divorce papers? First things first, I need a job. It seems everywhere I turn I hit a brick wall.
  10. #10
    LdiJ is offline Senior Member
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    Quote Originally Posted by stormyskies View Post
    Thanks for all the advice everybody-it's getting more complicated by the minute!
    The downpayment was put up by my parents ($3000), but he has put alot of beautiful custom woodwork into the house. We have been splitting the bills 50/50 since we moved in. I have been scrounging for work for most of the year, as we live in a very tourist based area, and no tourists have been here for a long while, putting lots of people out of work. He has a steady job, and I have tried for months to get one. Since all my money ran dry, I decided to let him buy me out of the house, instead of my original plan to get refinanced and buy him out.

    So you're saying that he should refinance the house entirely on his own? I may have to give him some time to get back on his feet to do that. See, I'm willing to wait if it means he gets to keep the house, and I get my proper amount of equity. We are not enemies. No, we don't have even $400 for an appraisal, we are scraping to get by because of my work situation. Believe me, I have interviews every day, trying to get a job just like 35% of the rest of the population in this little town. So I have contributed to his lack of funds for the appraisal, and I am trying to work with him. If he can't get refinanced, he will have to agree to make reasonable payments to me. Do we need to know this before we put the agreement into the divorce papers? First things first, I need a job. It seems everywhere I turn I hit a brick wall.
    I can just about guarantee that if you follow through with this plan, that you will be coming back here in a few years, upset because you and your new husband want to buy a house, and you are being turned down because your credit is tied up in the other house. Or even worse, that your credit is trashed because he got foreclosed on.

    Your husband cannot afford to buy you out. That's crystal clear. If he is struggling now to pay the bills without your income, there is no way that he is going to be able to afford (or qualify for) enough of a mortgage to buy you out.

    The house needs to be sold and the proceeds split. The two of you are not being realistic.
  11. #11
    VeronicaLodge is offline Senior Member
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    Quote Originally Posted by stormyskies View Post
    Well, it costs $400 for an appraisal, and neither one of us has any money at all. Also, I don't think 90 days is enough time for either one of us to come up with any money. That is, unless he gets a loan. The house was purchased just before all the prices shot up, so it was quite a deal, and has increased in value almost twofold. He wants to keep it mainly because it would cost twice as much as we paid for it to replace it.
    My problem is paperwork-the choices are: he gets it, she gets it, or sell and split. What is the name of the form that I need to put this buyout agreement on? How long of a time should be considered reasonable? We have been married 5 years, and have owned the house for 7.
    without an appraisal how do you know the value has increased almost twofold??????
  12. #12
    stormyskies is offline Junior Member
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    I know the value has increased because everything here has. And this is one of the nicer houses on the block.

    I'm not planning on keeping my name on the mortgage. When he refinances, I will not be on it. I'm not real sure how a quitclaim works, but I won't sign one until I get an agreement or payment of some sort.

    It's in his best interest to keep the house, and I need to include my best interest too.

    My question all along has been: how do I fill out the paperwork?
  13. #13
    tuffbrk is offline Senior Member
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    Sweetie - you are not listening. It is not in your best interest to agree to a payment plan. It will tie up your credit for years to come and if the home is foreclosed on - you will be included. If you sign a quit claim - all that does is say that you are NOT entitled to any interest in the home. The day you sign the quit claim is the day that you receive a cashier's check for your interest (equity) in the home. Until then - do NOT do so.

    Put in the paperwork that the home is to be put on the market if in the next 90 days your STBX does not refinance the home in his name only in order to compensate you for your equity.

    How is it possible that multiple folks are telling you that to do otherwise is a huge mistake and yet you want to continue down the same path?! This is a mistake financially as well as your presumption that the situation between yourself and your STBX will remain unchanged and that nothing else (employment, friends, lovers, etc.) will change either....
  14. #14
    LdiJ is offline Senior Member
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    Quote Originally Posted by tuffbrk View Post
    Sweetie - you are not listening. It is not in your best interest to agree to a payment plan. It will tie up your credit for years to come and if the home is foreclosed on - you will be included. If you sign a quit claim - all that does is say that you are NOT entitled to any interest in the home. The day you sign the quit claim is the day that you receive a cashier's check for your interest (equity) in the home. Until then - do NOT do so.

    Put in the paperwork that the home is to be put on the market if in the next 90 days your STBX does not refinance the home in his name only in order to compensate you for your equity.

    How is it possible that multiple folks are telling you that to do otherwise is a huge mistake and yet you want to continue down the same path?! This is a mistake financially as well as your presumption that the situation between yourself and your STBX will remain unchanged and that nothing else (employment, friends, lovers, etc.) will change either....
    Which is why no one here is going to give you any advice on how to fill out the forms. It would be completely irresponsible of us to do so.

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