I estimate that in more than 50% of my divorce cases, the allocation of the home and mortgage between the spouses is a serious issue. Because of the poor economy, couples own homes that are worth less than the mortgage balance, or cannot afford the mortgage payments on only one post-divorce salary. These couples need a carefully crafted agreement to address these real estate issues or they will find themselves with worse problems after the divorce. It is vital to consider the various options to ensure a clean and fair separation.
When neither party can afford to keep the home, the usual outcome is to place it for sale. Because of the weak market, however, homes may stay on the market for years. It is therefore necessary to clarify which party will stay in the home and pay the mortgage, utlities, and taxes. The agreement must also address repairs, additional loans/liens, and responsibility for offers to purchase. Finally, the parties and the closing bank must know how the proceeds will be applied and allocated upon closing.
If one party wishes to maintain ownership, the other party in most cases must relinquish his ownership in the home by filing a deed. The owning spouse must also act to remove the other’s obligation for the mortgage. This is because the parties’ divorce judgment does not bind non-parties (like the mortgage creditor), and therefore the judgment alone has no effect on the mortgage. Since Wisconsin is a marital property state, both parties are responsible for the mortgage, even if only one spouse is actually listed as the debtor. The owning spouse usually does this by refinancing the mortgage in her sole name. However, because refinancing rules have been severely restricted, the owning spouse may have great difficult doing so. This leaves both spouses maintaining ownership and obligations for the home well after the divorce, even though the divorce judgment may state otherwise. Once again, a carefully drafted marital agreement will anticipate these issues and include means to resolve them.
I receive repeated requests from potential clients throughout Dane, Sauk, and Columbia counties to resolve issues related to home ownership and sale post-divorce. Most of these problems result from agreements that did not anticipate these issues. In these cases, it can be extremely difficult to provide a satisfactory resolution. A spouse who is faced with such a problem should contact an experienced family lawyer immediately. Even better, contact a lawyer to draft the agreement to resolve these problems in advance. I have extensive experience with home-related issues in divorce, and I encourage spouses to contact me to discuss their options.