Property division when house is underwater

[DecisionTime]

What is the name of your state (only U.S. law)? OR

I posted a few months ago with a question about equitable distribution - thank you for the responses. At that time I thought there might be about $50K equity in the marital home. Based on recent sales and listings in the area, we are more likely in fact now underwater, though I haven't yet ordered an appraisal. Divorce papers have not yet been filed.

I am hoping to do some simple improvements and wait out the market to then downsize without damaging my (and his) credit, but want to finalize the divorce regardless of the property market situation. I know we can't begin any sort of property division negotiation without an appraisal, but I'm trying to get a feel for what would be a likely judgement if we are indeed underwater. There are really no other assets to speak of but about $20K in a 401(k).

STBX is under the impression that no judge will order I can keep the house without his agreement. But I can't imagine a judge ordering a short sale as that needs lender consent. In a negative equity situation, if I can make the payments but he can't, would the most likely judgement be that I make the payments and keep the house?

 

[mistoffolees]

What is the name of your state (only U.S. law)? OR

I posted a few months ago with a question about equitable distribution - thank you for the responses. At that time I thought there might be about $50K equity in the marital home. Based on recent sales and listings in the area, we are more likely in fact now underwater, though I haven't yet ordered an appraisal. Divorce papers have not yet been filed.

I am hoping to do some simple improvements and wait out the market to then downsize without damaging my (and his) credit, but want to finalize the divorce regardless of the property market situation. I know we can't begin any sort of property division negotiation without an appraisal, but I'm trying to get a feel for what would be a likely judgement if we are indeed underwater. There are really no other assets to speak of but about $20K in a 401(k).

STBX is under the impression that no judge will order I can keep the house without his agreement. But I can't imagine a judge ordering a short sale as that needs lender consent. In a negative equity situation, if I can make the payments but he can't, would the most likely judgement be that I make the payments and keep the house?

That is one scenario -and in an amicable divorce, it may even be likely.

HOWEVER, if your stbx insists that they don't want their name on the mortgage because it limits their ability to buy a home, the judge could also reasonably order that you take the home and have to refinance it within xxx days. If you are unable to do so, you must sell the house. While the judge would not be actually ordering a short sale, the requirement that you must refinance it or else sell it would have the same effect (unless you can come up with enough cash to bring to the table to allow refinancing to occur).

If the judge goes with the first option (simply orders that you keep the house and take over the mortgage), there is a significant possibility that you'll end up back in litigation at some point, anyway. Better to get it all resolved at once unless the two of you are able to agree that you'll keep it and not refinance it for years.

 

[DecisionTime]

Thank you Mistoffolees. He will not be in a position to seek a mortgage for some years.

If I were able to get a loan assumption or refinance in place, the judge could order that even if he didn't agree, right? My thinking is that property is like any other marital asset or liability as far as being divided - it will come down to a split of dollars between us. He thinks that as he is a co-owner, no disposition of the property can happen without his approval.

 

[mistoffolees]

Thank you Mistoffolees. He will not be in a position to seek a mortgage for some years.

If I were able to get a loan assumption or refinance in place, the judge could order that even if he didn't agree, right? My thinking is that property is like any other marital asset or liability as far as being divided - it will come down to a split of dollars between us. He thinks that as he is a co-owner, no disposition of the property can happen without his approval.

No disposition of the property can occur without his approval NOW. (actually, it would be a bad idea to sell the house without the judge's OK even if stbx DID agree).

However, the judge can order that you get the house and the debt and your stbx will have no say in the matter. If there is any equity, you will have to reimburse him for 1/2 of the marital portion of the equity, but that's about it.

 

[LdiJ]

What is the name of your state (only U.S. law)? OR

I posted a few months ago with a question about equitable distribution - thank you for the responses. At that time I thought there might be about $50K equity in the marital home. Based on recent sales and listings in the area, we are more likely in fact now underwater, though I haven't yet ordered an appraisal. Divorce papers have not yet been filed.

I am hoping to do some simple improvements and wait out the market to then downsize without damaging my (and his) credit, but want to finalize the divorce regardless of the property market situation. I know we can't begin any sort of property division negotiation without an appraisal, but I'm trying to get a feel for what would be a likely judgement if we are indeed underwater. There are really no other assets to speak of but about $20K in a 401(k).

STBX is under the impression that no judge will order I can keep the house without his agreement. But I can't imagine a judge ordering a short sale as that needs lender consent. In a negative equity situation, if I can make the payments but he can't, would the most likely judgement be that I make the payments and keep the house?

A judge can order that the house be sold...with the understanding that its subject to lender approval.

What a judge really cannot do is order that YOU get to keep the house and HE has to remain on the mortgage. Therefore yes, you really do need his agreement.

Get the appraisal and then start negotiating with your ex. If you can afford the mortgage payments and you won't put his credit at risk, then you need to convince him that he will be better off if you hold on to the house for a while to give the market a chance to improve.

 

[DecisionTime]

Thank you both very much for your input. I am hoping that I can get a loan assumption as all loan qualification was on my income and credit score, he is on the note but had no income. Time to seek an estimate or appraisal and see where we stand. I don't want to screw him over, but I really don't want to mess up my credit with a short sale.