Selling a home as a result of divorce is never easy and there are some common and frequent pitfalls to be aware of when discussing the sale of the home.
Because law school doesn’t teach real estate, it’s not uncommon for attorneys to overlook asking questions whose answers will reveal the true financial status of a home owned by a divorcing couple.
While many liens and obligations will show up on a preliminary title report, the follow obligations may not.
Loan Modifications: Because each loan modification is unique, the only way to determine whether there is a deferred principal balance is to read the Loan Modification documents. Most homeowners don’t have a copy, so in those instances, it is necessary to contact the lender.
The presence of a deferred principal balance can wipe out any equity the couple expected upon sale of the house. However, under some modifications, that deferred balance will be forgiven if the payments have been made on time for at least ten years.
In those cases, a sale in 9 years and 11 months could trigger an event that would harm both spouses, and could lead to other challenges in settling the case.
HERO or PACE loans: These home improvement loans also may not show up on a title or credit report. They are paid off through an increase in property taxes and must be repaid upon transfer of the title. Always check to see if such a loan exists.
Solar equipment: The purchase or lease must be addressed to avoid a future issue. When the house is transferred, the solar provider may be willing to rewrite the lease. If not, negotiations and called for. The lease is often an enforceable lien and will need to be satisfied for the property to transfer.
Intake forms should ask: Have you ever had a loan modifications (often homeowners will forget they did this)? Have you every gotten and type of energy system improvement loans? Did you install solar power?
These questions will help to uncover hidden financial land miens that can have significant impact on a case.