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Monday, September 7, 2015

Regaining Equity from Home After Divorce

Ed. - This post is by Cathryn Wayne-Spindler, a local family law attorney with whom I work occasionally on divorce cases that require that the family home be sold as part of the settlement. 

The current strong real estate market and higher home values are good news for many people, especially those whose mortgages were underwater because they owed more on their home than the house was worth. The July 2015 Existing-Home Sales statistics showing a two percent increase were released recently.

“Sales in July remained at the highest pace since February 2007 (5.79 million), have now increased year-over-year for ten consecutive months and are 10.3 percent above a year ago (5.07 million),” according to a National Association of Realtors article, “Existing-Home Sales Maintain Solid Growth in July.”
Many people are now finding relief as they are once again able to either sell their home or refinance and access some of the home’s equity. This has particular significance for couples who divorced during the economic downturn and found themselves either unable to sell or unable to recoup any home equity. In many situations, one partner agreed to keep making the mortgage payments on the family home to avoid foreclosure.

With the stronger real estate market, realtors and divorce attorneys are working with clients who divorced years ago and are now looking to either get out from under their former mortgage or regain some of the equity that did not exist when they split.

When people ask Southeastern Michigan Divorce Attorney Kathryn Wayne-Spindler what they can do to get out of the prior mortgage or recoup some equity, she first recommends revisiting the divorce settlement papers’ division of marital property.

“It’s all about the Judgment of Divorce. A judge can only enforce what was in the contract you signed at the time of the entry of judgment.”

Wayne-Spindler says some experienced divorce attorneys were long-sighted. “We realized during the tough times that the financial situation would mostly likely rebound. So we negotiated terms into our clients’ divorce settlements that would require the spouse retaining the house to sell or refinance within a certain period of time,” said Wayne-Spindler.

If that’s your situation, the courts can enforce those requirements and you will be entitled to your share of the home equity (if in the judgment) and/or be released from your connection to that debt.
That’s important, especially for any divorced person who may be looking to move on in life and buy a new home. With your name still attached to the mortgage on the prior house, the debt-to-income ratio may have been too high to be approved for a new mortgage, even if you were not contributing to the home payments. Any divided equity from the sale of the first home can also be applied as a down payment for the next home.

Unfortunately, many divorce attorneys either did not look to the future or were not able to secure those kinds of clauses in their client’s agreement. If that is the case, unless your ex-spouse is willing to sell out of the goodness of his/her heart, it’s unlikely a judge would force him/her to now.
If the divorce settlement does not include a clause about selling or refinancing, consult an experienced family law attorney to determine your options.

Once you’ve determined what clause applies in your situation, it can be helpful to confer with an experienced Realtor like Norm Werner who can advise you about current market conditions and help you sell your old home or find a new home. It can also be advantageous to work with a local home appraiser like Norma Nicholson who can determine an anticipated home value so you know what to expect.
Attorney Wayne–Spindler has experience helping clients with their divorce and real estate questions. Contact her Milford, Michigan office for more information at 248-676-1000.

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