If you’re getting divorced and your soon to be ex spouse is going to let you keep the house, you better stop and ask why. Is it out of the goodness of their heart, or is there something that you do not know?
I’ve run across this several times over the last few years, since the housing crisis happened in 2007-2009, where one spouse “lets” the other one keep the house, only to find out the house is worth less than what’s owed. What seems like a gift can turn into just another real estate disappointment. To protect yourself, before you accept a house in a divorce, here are a few questions you should answer.
What’s that House Really Worth?
This won’t come as a shock to anybody who watches the evening news or reads the daily newspaper, but houses still aren’t worth what they once were. You may remember what you paid for it back at the peak of the market, but that has little to do with what you could sell it for in today’s market.
House values decreased greatly, and although they are starting to go back up, there’s a long way to go in the real estate recovery. Frequently, strained relationships and strained finances go hand in hand. If you missed a house payment or two or three, there may be late fees and charges that you’ll have to pay too. If your spouse was in charge of paying the bills, you may not even be aware of this.
Find out what your house is really worth and find out how exactly much you owe and ask yourself if the house is really worth keeping.
How Much Will it Cost to Sell the House?
Let’s say you’ve found out the house is worth $200,000 but you only only owe $185,000 on the mortgage. Why not let your spouse let you keep the house. After the divorce is done maybe you’ll just sell and take the difference?
Not so fast, you’re forgetting that selling a house costs a lot of money.
The rule of thumb that I use is it costs about 9 or 10% of the home’s value to sell it using a Realtor. The includes not only Realtor commissions, it includes other costs like lender related fees that sellers typically pay on behalf of buyers here in Albuquerque like the appraisal. It includes title transfer fees like the closing fee and the Owner’s Policy of Title Insurance that sellers almost always pay here (unless it’s a new construction home). It can include inspection costs or repairs costs too. It adds up fast.
That $200,000 house that you owe only $185,000 on? Understanding that it costs $18,000 to $20,000 to sell, you’re now upside down. That means you would have to bring cash to close.
Get an Appraisal; Consult an Attorney
Before you make a mistake, get an appraisal on the property and consult with an attorney. Don’t let anyone take advantage of you.
by Albuquerque Real Estate Agent Rich Cederberg eXp Realty (505) 803-5012.