Our guests today are family and real estate attorney, C. Catherine Jannarone, Donna A. Ranieri, a Mortgage Lending Officer, and Daniel H. Green, a New Jersey family law and real estate attorney. We are discussing the spouse and the house and dealing with real estate during divorce.
Our guests today for “The Spouse and the House: Dealing With Real Estate During Divorce” are
C. Catherine Jannarone, Esq.
C. Catherine Jannarone, Esq. is a New Jersey attorney with over 30 years experience who has devoted a substantial portion of her practice to family law, including collaborative divorce and mediation as well as litigation. She is also a former judge.
Address: 30 Freneau Avenue Suite 1 B, Matawan, NJ 07747
Donna A. Ranieri
Mortgage Lending Officer with over 35 years experience in banking, Advisor at Jersey Shore Collaborative Law Group & Mid-Jersey Collaborative Law Alliance, Empire’s Who’s Who of Professional Female Executives 2004-2007, Member of International Academy of Collaborative Professionals (IACP), Member of Collaborative Divorce Professionals.
Address: 303 Broad Street 2nd Fl., Red Bank, NJ 07701
Daniel H. Green, Esq.
Daniel H. Green is a New Jersey family law attorney who has dedicated his practice to all matters of family law and real estate and has combined his skill in those areas of law to offer his clients a unique perspective of experience, addressing the financial and family concerns of his clients, during the time of divorce. Mr. Green has been in practice for more than 25 years and is a member of the Collaborative Divorce Professionals. He has been trained as both a family law mediator and as a collaborative divorce lawyer practitioner.
Address: 4400 Route 9 South, Suite 2200,Freehold, New Jersey 07728
IN THIS EPISODE, YOU’LL LEARN:
I. Sell now
II. Sell later
a. Who pays mortgage in interim?
b. What if there are late payments made by one spouse (S1) who is responsible to pay, and both spouses’ names (S1 & S2) are on the loan?
c. Will indemnification by one spouse (S1) to the other (S2) in the PSA:
i. Keep the lender from coming after the other spouse (S2) for payment? (NO)
ii.Prevent damage to the credit of the other spouse (S2)? (NO)
d.How to protect in this instance?
-If both must stay on the loan until the house is sold at a future date, both can refinance for lower rate on new extended term, to lower payments, and make it more affordable for S1.
-Joint marital asset can be reserved to make payments.
-Question: should the whole amount be used or should the spouse in the house (S1) have responsibility to pay?
-Alimony and/or child support payments can be applied directly by the other spouse (S2) to pay mortgage.
-Penalty clauses- i.e. if any mortgage payment is 30 or more days late, S1 must put the house on the market.
-Both spouses (S1 & S2) to have full joint online access to -mortgage account, so they both can see when all payments are made.
2. Other considerations for deferral of sale:
a. Who gets deduction for mortgage interest and real estate taxes?
i.S1 may be paying, but S2 is deferring getting his/her equity.
b. Repairs: who makes them?
i. Often set a cap- anywhere from $250-$1,000- that the spouse in the home pays.
ii.Over the cap, parties split equally, after S1 gives S2 advance notice and S2 has the opportunity to ascertain the need for repair and reasonableness of cost, except in the event of emergency.
III. One spouse buys out the other
1. How do you set value? Unlike a sale, when the market sets the value, in a buyout, the parties need to ascertain fair market value. How?
a. Get 3 CMAs and average.
b. Agree on joint appraiser and split the cost, and use that number
c. Each pay for own appraiser and average
d. Should you use value for tax purposes that comes in the mail each year with the tax bill? (NO)
2. What if the home is in poor repair?
a. Buying spouse (BS) can pay to get home inspection done, to find out if there are any potential major issues in the house. Some things may not be readily apparent even to someone who has been living in the house.
b. See if your town has a list of items that will be required to get CO on resale. Are any items on the list missing or in need of repair? If the answer to either is yes, the parties can negotiate to lower the value of the house accordingly.
3. How does the buying spouse (BS) pay the selling spouse (SS)?
a. First compute the equity, which is the stipulated value minus any mortgages, and divide the equity by 2, barring any other credits.
b. Pay by waiving comparable value of other marital asset (DISCUSS)
c. Get new mortgage in BS’s name only-
i. Must be enough to pay off existing mortgages, and, if needed, secure the funds to pay SS equity to him/her
ii. Usually even if there is a trade of assets between the parties, so that BS does not need to borrow mortgage money to pay SS, BS will still need to pay off existing mortgage so SS’s name is off them and released from any liability.
4. Before agreeing to be the Spouse with the House, what should you do?
After working with an attorney to determine what you must borrow to buy out the spouse and extinguish old mortgages-
a. Aamount of loan needed credit score of borrower;
need for co-signer or not;
term of loan (longer is cheaper rate, fixed is sure thing for budgeting purposes. ARM’s are lower in rate but can be cheaper)
b. Any other debt
c. Any open credit issues
d. Determine if payments are affordable. Consider ability to pay:
-real estate taxes
-outside maintenance such as lawn care and snow removal
Get copies of credit report prior to applying for loan, so you can see if there are any old issues to clear up.
Work with an attorney who will work with a loan representative who is experienced in divorce lending, to help you through the process for a smooth and successful transaction.
Thank you joining us his week. Do you have any thoughts or feedback to share? Please leave a comment in the section below.