Real Property and Divorce In A Declining Real Estate Market

Compounding marital dissolutions are the effects of a troubled real estate market. Bloomberg recently reported that foreclosures and mortgage delinquencies have now hit 29 year highs. Couples going through a marital breakup must deal with the whammies of lower incomes, higher payments on adjustable rate mortgages, and tightening credit; all of which serve to make selling and refinancing marital property extremely difficult. These difficulties result in lowering values.

These external factors serve to create problems in valuing and dividing real property. Take the family residence. One spouse may want to keep the house for emotional or practical reasons (e.g. kids in school). In a boom market, that spouse may be forced to "overpay" for the right to keep that house because they are charged with the equity in the marital balance sheet. In a down market, however, it is the "out" spouse who is disadvantaged, watching a property worth nothing when they divorce, increasing in value many years after moving on to new relationships and jobs.

  One way spouses can address these concerns is to pick a date of sale or valuation in the future so that extreme market variances can be minimized. The parties can remain on title together until that time.

Article Submitted By: Attorney Daniel Gold