In more than a few recent cases, the stumbling block to settling the case has been the marital home. As a result of the real estate market meltdown, Atlanta divorce attorneys have had to rethink how they structure agreements regarding real property. So what do you do in a case when neither party wants the marital home? It’s the proverbial hot potato no one wants to be left holding.
When clients are contemplating walking away from a home, our job as divorce attorneys is to eliminate or at least minimize a client’s loss when structuring an exit strategy. The first step in making this happen is to ensure the client has the information necessary to make an educated and informed decision. One of the key pieces of information is how much equity, if any, is in the property. Knowing whether the client would need to bring funds to the closing table if the property were sold allows us to immediately rule out certain options. Other critical facts clients need to be aware of include who is listed as a borrower on the mortgage, how far the mortgage is in arrears and both parties’ financial condition and employment plans.
Several possible alternatives clients may want to consider include bankruptcy, foreclosure, leasing, a short sale and a limited sale. Something I am seeing more often in divorce practice is parties choosing to “walk away” from a property. Although this is not a situation we encourage, in some cases foreclosure is the only option. While “walking away” may not be the best moral decision for some, it may make sense, at least from an economic perspective, to those parties who owe much more than the home is worth. If the parties agree to a foreclosure, the parties need to ensure that the possibility of a Deficiency Judgment is addressed.
Other alternatives to consider are leasing out the property until the market recovers or placing the home on the market in the hope of a short sale. A short sale may not be an option, however,since most lenders won’t even consider an offer on the property for less than the amount owed, unless the borrowers are at least several months behind on the mortgage.
In situations when parties are underwater or facing foreclosure on the marital residence, it is important to have an experienced divorce attorney. Regardless of the situation, an improperly drafted agreement could leave a person with a financial obligation in the divorce case that they cannot even bankrupt. The few hundred dollars a person might save by not having a lawyer draft the agreement can easily be lost if they draft a bad agreement. A knowledgeable attorney can work with you to craft the right agreement, to suit your specific needs and minimize any losses.
By Alyssa Vaughn, Associate, Meriwether & Tharp, LLC