To Keep It or Let It Go?

It’s (hopefully!) a short week-before-Memorial-Day for you, so let’s tackle a serious subject before getting onto a great long weekend!

Divorce.  Specifically divorce and houses.

I’ve handled plenty of situations involving divorces and real estate.  Divorces are already traumatic enough for everybody involved, but having real estate only complicates the matter.  In “Divorce and Money: Six Costly Mistakes,” Veronica Dagher reveals how feuding couples can make an already-ugly situation even worse.

When it comes to real estate, Dagher notes that keeping the house can be a huge mistake.  Dagher said it all when she wrote, “But a household that took two people to run may be far too expensive for one.”  I cannot begin to tell you how many times I’ve seen this exact situation occur.  Many divorced now-singles struggle to hold onto the house.  They want to keep up appearances, keep their kids in the same school district, or want to hold on to good memories or a good lifestyle.  It’s frequently done on the childrens’ behalf.  While those are understandable feelings (especially when your kids are involved!), the reality of covering mortgage payments, property taxes, utilities, and upkeep and maintenance frequently ruins those goals and financially destroys the former spouse.

I’ve seen plenty of divorced people with good intentions get forced to sell the house in a financial crunch, sometimes taking a loss, because the home forces them into an ugly financial position.  It’s very tough to keep up appearances, maintain the same school district, and keep a lifestyle going when you’re broke at the end of each month from keeping up the house!  And if it seems disruptive to the kids to move, imagine the disruption when you’re forced to move in the middle of a severe cash crunch.

No house is worth the risk of not putting food on the table, and yes- I’ve seen this happen to some formerly very well-heeled people.  The financial issues seem to hit upscale divorcees harder compared to middle and lower class divorcees.

The best financial option is often keeping your lifestyle by downsizing the house.  Instead of keeping up appearances in a large house, go to something that’s easier to maintain and has a far less expensive mortgage, but is in the same school district to minimize disruptions to the childrens’ school lives.  Keep your cash, not the house.

While this is a bit dark, I’ve also heard of more than one divorce attorney counseling their client to make a show of “negotiating” the old family home to their to-be ex.  Not only can the ex use the negotiations to appear reasonable in court and trade off / preserve their own assets, but it becomes financial revenge against the ex down the road when the house is no longer affordable…  After draining their accounts to keep the house!

Yes, as a real estate broker, I have a vested interest in helping people buy and sell homes.  However, there’s a reason that the Wall Street Journal cites keeping the old family house as one of the six costly financial mistakes in a divorce.  Do the math and look at the costs of keeping and maintaining the large house versus right-sizing into a new and more affordable home.  If you have questions or want to discuss real estate in a divorce situation, please let me know.  I’ll be happy to offer an honest and fair consultation.

For the record, the other mistakes are overlooking assets, underestimating expenses, seeking revenge, forgetting about taxes, and thinking that the work is done.  If you’re contemplating or going through a divorce, I highly recommend this article.