Will the Sale Bring in Enough Money to Pay Off the Debt?
If there will be an equity distribution, efforts to bring the property to its best and highest value may fall on one party or the other, and consideration must then be given for reimbursement for any additional costs.
But if the property will not sell for an amount sufficient to pay off the debt, the parties need to consider the level of cooperation they need to have to assure that each can be discharged of any liability on the remaining debt.
Short Sales During a Divorce
Cooperating in a short sale, does not mean that either party has to give concessions regarding other issues pending in the divorce, but it is going to mean the each needs to be candid in the disclosure of their financial information to the lender.This should not be tricky since all the financial information has to be disclosed in the divorce proceeding anyway – right? It is unlikely that the attorney for either of the parties can represent both in the short sale negotiations, since there is a conflict of interest.
What if the Divorcing Parties Own the Property in a Tenancy by Entireties?
If the parties own their property in a Tenancy by the Entireties (TBE) there can be another layer of complication. A TBE provides the legal fiction that each party owns a 100% interest in the property. Therefore, the creditors of one cannot touch the property in which the other has a 100% interest. If one of the parties needs to file a bankruptcy, it is best done before the parties separate and divorce, since that act severs the TBE and leaves the ½ interest of the bankrupt party subject to creditor’s claims as well as possibly reducing the value of the property for the non-filing spouse.
There so many emotional issues attendant to the breakdown of a marriage. Assuring that you know and understand the complications surrounding real estate issues will help you to make better decisions and preserve equity in the property. Contact Minchella & Associates for more information about selling real estate when getting divorced.