Friday, September 5, 2008

What to do with the House

I have been seeing more and more divorces where the parties remain in the same house for a significant period of time after they have officially "separated". A recent article in the San Diego Tribune discussed the phenomenom and suggested some creative solutions for house problems. Fortunately, the housing market here in North Texas is better than the one described in San Diego, but there are still serious problems experienced by divorcing spouses here. Because of the way mortgages were being offered in the last few years, more and more people are experiencing housing crises.

Sometimes, sharing a house can save the parties a great deal of money by postponing the need for one or both parties to buy or rent another residence. That may make it possible to pay down their debts and maybe save up enough to afford a new home. Of course, whether that is feasible depends on how well the parties get along. Even if the parties aren't getting along very well, it may be possible for them to get counseling just to help them learn how to get along on a limited basis for the greater good. When there are children involved, improving the parents' behavior can have added benefits for the children as well as the parents.

Here are some possible strategies for dealing with a personal housing crisis.

1. Forget about making a killing in the real estate market -- just sell the house now! Most houses require some fix-up to get ready to sell. If the spouses will act like adults and work together (or just divide up the jobs), they can do some fix up and then come out in better financial condition. Once the house is fixed up, they need to cooperate in showing the house and keeping it in presentable condition.

2. Borrow money to avoid foreclosure until you can sell. Foreclosure really hurts your credit score, so if there's something left to protect, you should keep searching for sources of funds to borrow to make your payments until the house sells.

3. Divide up the house and each spouse can use parts of it. How difficult that is depends on how well the parties get along. If the parties coexist well, they can share a house for quite a while and split the expenses. If they don't get along, this isn't much of an option. If the finances are really in bad shape, one or both of the spouses need to make some adjustments in behavior so they can share the space without going to war.

4. If there are kids, use a bird nesting approach. In that system, the kids stay in the house and the parents take turns staying in the house while the other stays in an apartment or with family or friends. It provides stability for the children and gives each parent quality time with the kids.

5. Bring in the experts. You can work with a financial planner to come up with possible solutions that fit your financial ability and needs. Even though you may have run out of ideas for solutions, there may well be some ways to work through the situation. An expert in personal finances in divorces may help you discover new solutions. In addition, a mortgage broker may be able to find creative ways to refinance or get money out of the house, if needed.

If all else fails, you can have a receiver appointed and get the house sold to avoid foreclosure. That is a last resort because there often is little equity remaining after the sale.

Thanks to a post about the article that appeared in the Houston Divorce and Family Law Attorney Blog, always a source of interesting and varied posts.

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