RSSReal Estate Q&A
Dave,
My husband and I are in the process of splitting up and potentially getting a divorce. He wants to sign the house over to me, so the kids and I will have as little disruption as possible and the kids can stay in the same schools. He intends to move, for his job, out of state. I can not afford the payment on my income alone and I suggested we try to sell, but I am afraid we are “underwater” since we have only lived here four years. I am sure we owe more than we can sell it for and we do not have much of a savings built up. A very similar house on our street sold for $230,000, which is about $100,000 less than we owe. How should we proceed? I would love to stay, but don’t think we can. Thanks.
— Elizabeth, Grand Junction
Elizabeth,
I am so sorry to hear about the state of your family. There seems to be many families feeling the stress of our times and unfortunately, this is often the result. It is obvious you have a loan on the property and thus signing the property over to you may prove difficult. You can transfer who is in title to the property, but the bigger question is: “Who is on the loan of record?”
For our purposes here, I will assume that both of you are on the loan. It will likely prove difficult, if not impossible, to remove one of you from the loan, especially if you are “underwater” and it sounds as though that is a likely scenario. It also appears if you are able to get title transferred and get one of you off the loan, then the person still on the loan will be solely responsible for not only the home, but also the debt. Since this is a debt and purchase that was done by “both” of you, then both of you will be accountable for settling the debt. Unless you want to be “solely” responsible for the house and the debt it would probably be in your best interest to contact an attorney to get some direction on the settlement of the house and any other financial issues that might come up.
That being said, since this is as much a lending question as it is a real estate question, I solicited some help from James Pulsipher, regional vice president at Fidelity Mortgage and he explains several options you may also have: “It depends upon the loan type. If its an FHA or VA loan, then they can refinance without appraisal. If they have a conventional loan and it was made prior to June of 2009 then they may be eligible for a HARP (Home Affordable Refinance Program) refinance. In these cases, the insuring agency, Fannie Mae or Freddie Mac, would determine the value and they can refinance, in some cases, up to 200 percent of existing value. In all cases they would require that both husband and wife remain on the loan, if that is how the loan was originally made.”
Bottom line, contact your lender or who you make your loan payments to and investigate your options, but ultimately if you and your husband are not going to stay together and a divorce is on the horizon, it may be time for some legal advice about your options. There is not going to be an easy answer or easy way to “cut the financial stings” between the two of you, as it pertains to your home and the financial responsibility you both have. I wish you and your family the best during a very difficult time.
Dave Kimbrough
The Kimbrough Team
RE/MAX 4000, Inc
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