What If You Can't Sell Your House?

Divorce doesn't happen only in the best of economic times.

Last fall, the economy replaced wars and foreign affairs as the most important topic for most people during the Presidential campaign. The "housing crisis" is a major component of the economic downturn. While the stock market has been going up and down (mostly down), house values have been steadily going down. Add to that the "mortgage crisis" and we have suddenly gone from an environment of steadily rising house prices and readily available mortgages to falling house values and a very restricted mortgage market. I know this isn't news to you and you aren't interested in rehashing current problems. Actually, I'm writing to suggest some solutions.

So, what do you do if you what to get divorced, but you can't sell your house? Here are five ideas to consider.

1. Stay together. This may not be what you want to hear, but counseling is cheaper than paying for two households. While this won't be appealing to a lot of couples, others may see the logic. If it is not a dangerous situation, maybe the economy will encourage some couples to try harder to save their marriage. There are excellent counselors available everywhere. They can be effective, if you make the commitment and really try hard to adjust and make changes. For many people, there is still value in their relationship and often there are kids who can benefit from an intact family, if the parents try to resolve their differences.

2. Refinance. If you don't want to stay together, maybe you can refinance. The key is to work with a mortgage specialist who is well connected in the mortgage industry. If you can find a mortgage specialist who focuses on people who are going through a divorce, you may discover that there are several different ways to solve your financing problems. You might be able to get some cash out or maybe you can lower the monthly payments so that one of you can afford to keep the house.

3. Lease your house. If you can't sell it and don't want to stay in it, maybe you can lease your house to someone else. There can be tax benefits from that and it can help your cash flow as well. It does take either a professional property manager or a willingness to provide or supervise the property maintenance and make sure the rent is received on time.

4. Sell creatively. Some couples are selling their homes by having a lottery. They sell a large number of inexpensive chances to win the house. You might be able to get some free publicity by donating some of the proceeds to charity or by using the money in some fashion that would be appealing to the public. Another approach is to have an auction. Don't let yourself be limited to selling in the traditional manner. Talk to some marketing people for ideas!

5. Wait for Congress. There is a huge push in Washington to come up with new programs to help solve the mortgage/housing/economic crisis. There will probably be some new programs in the very near future to help avoid foreclosures. The new programs could include ways to help you sell your house (by improving the credit markets) or make it more affordable so you don't need to sell it.

Couples going through divorce often need to sell their homes for various reasons. If you are facing that issue, consider using one of the approaches mentioned above. If you have any other ideas for solutions, please share them by sending a comment.

5 Creative Tips for Using Home Equity During Economic Uncertainty

In many marriages, one of the biggest assets is the equity in the house. Even thought we are in the midst of tremendous financial uncertainty, there are still several options that can be considered when dealing with home mortgages when it comes time to divide marital property in a divorce.

1. Sell the house and split the equity. The house can be sold and then the equity can be divided between the parties. Of course, in various parts of the country, house values have drastically plunged, which reduces the net equity upon sale, if the house can even be sold. Fortunately for us locally, the Fort Worth and Tarrant County housing markets have felt minimal effects from the housing downturn. For the immediate future, it looks like it will be possible to sell a house and still come out in pretty good shape, at least as compared to other parts of the country. Of course, a relatively new house for sale in an area with continued (or recent) new building will be hard to sell, so the local market isn't good all across the board. Still, Tarrant County house sales are reported to be pretty strong.

2. Consider the equity as just another asset. If one party wants to keep the house, it may be possible to keep the house and just offset the equity with other assets. In other words, the other party can keep other assets that total the same in net value as the house equity, so both parties are happy. It is pretty easy to get a house appraised and to find out the current mortgage balance on the house. The difference, which is hopefully positive, is the equity. Be sure to consult with your attorney or CPA about the tax implications of various assets when you are thinking about how to divide them up.

3. Refinance with cash out. There can still be refinancing, although the rules are tighter and there is less cash available. If you want to refinance, check with your attorney for a reference for a mortgage broker who may be able to help you. With the tighter credit market, a higher credit score will probably be required, but brokers are still anxious to work deals within their guidelines.

4. Cash out through an owelty loan. A specialized form for refinancing is to get an owelty payment from the house equity. This is a form of refinancing utilized in Texas that provides flexibility and a fairly easy way to withdraw cash from house equity. Again, your attorney may be able to recommend a mortgage broker who can help you.

5. Reverse mortgage. It may also be possible to get a reverse mortgage if you are at least 62 years old and there's sufficient equity in the house. Cash is paid out to you and you don't have to repay it as long as you live in the house. Various lenders provide this service which is relatively new in Texas. Make sure you understand how it works before you sign up for it. It can provide cash even when you are retired or have low wages.

If you are in the situation where your house is the major asset, you can consider using one of the above approaches for getting cash or the value of cash for your interest in the house. Talk with your attorney about who to contact. It helps to have a budget and to plan for your future wants and needs. Do you want the house? Can you afford to pay for it? Can you afford the extra cost if more money is borrowed against it? Would cash be better for you? What are the tax consequences? These are all issues you need to carefully consider with your attorney and possibly a financial advisor, such as a CPA.