Before the Great Recession, the going philosophy was that the marital home was a prize to be won during the property division process of divorce. Today that philosophy no longer holds as much water as house prices have deflated. The consequence is that couples who go through divorce today try to avoid ownership of a marital home that has lost value. For some, the upkeep of the mortgage on the marital house after divorce poses as a stealth financial disaster.
Downturn In Housing Market Affects The Traditional Approach To The Marital Home
In years past, one divorcing spouse usually received the marital home as a part of the divorce settlement, and the notion of the receipt of the marital home was a positive one.
During good times, the former spouse who retained the marital home could profit from the sale of a home that substantially increased in value. Therefore during a good housing market, the home is viewed as a reliable asset. Instead of deciding who gets to keep the marital house, people going through divorce today more typically argue over how to rid themselves of the marital house because it is viewed as a liability.
Since the housing crisis, the good times have evaporated and with it the idea that the value of a home can endlessly go up. The home is no longer viewed as a steadfast asset as residential real estate prices fluctuate. Commenting on the issue, a divorce lawyer in Forbes said, "When the value of real estate is uncertain [or] not readily salable the house becomes a liability."
In the current market, divorcing couples often choose to sell the marital home but face the task of how to agree on the selling price of the home. During the process of selling the home, one of the former spouses often wants to appraise the value of the home at a higher price than the market reflects. The desire to sell above market price usually leads to in-fighting among the divorcing couples who continue to argue as the market value in some cases drops further. Others who cannot agree on a selling price retain the house and sometimes there can be devastating financial consequences.
Many Divorced Spouses Are Unable To Pay For The Home Once Single
Despite the difficulties of the current real estate market, some former spouses still want to keep the house for the children or because the house is viewed as an asset. Often the financial consequences of keeping the house are overlooked.
A typical example of this was recently highlighted in Forbes: one woman decided to retain her and her former husband's marital home after divorce but in the end found that it was a "bad financial decision." On two incomes the woman and her former husband were barely able to afford it. When it came time to list the house, the woman's former husband wanted to list it almost $150,000 higher than she did.
The woman warns, "He tried to trap me in the house, and he didn't want me to sell." The woman eventually sold the house at a loss and now the woman and her daughter live in a rented two-bedroom condo. She laments her financial situation would have been worse had she kept the house but is happy that all of her resources are no longer devoted to the house.
If you are considering or going through divorce and own a home, contact a Massachusetts divorce attorney to review your legal options for the property division process.