By Douglas Katz – 06/07/2022
When deciding on what to do with the marital home in a divorce, it is interesting how rarely divorcing couples engage the assistance of a housing expert. In everything else that we do, we typically engage the services of somebody who not only has the credentials to assist, i.e., trained mediation for example, but also has the experience and training to help with the home. I see this mistake made all too often and even when things work out, there can be unnecessary costs and confusion.
- THEY KNOW THE LENDING GUIDELINES AND REGULATIONS – If you have applied for a mortgage since 2008, it is no secret that there is a mind-numbing number of guidelines that dictate the process for a prospective borrower. These are NON-NEGOTIABLE as they were put in place to protect the consumer. Waiving them are not an option, even if you think that they are silly and unnecessary. Add to that the guidelines which are very specific and cannot be subjectively overruled by an underwriter. Many frustrated borrowers communicate that they have superior credit histories, and they cannot understand why they need to provide particular documents or why they cannot get approved in the program that they want. While this may be true, regulations such as The Fair Lending Act require that decisions be equitable and objective. That is not to say that there is not a right way to work a divorce loan. There is and that is why you need a mediator who knows what can be done as opposed to theoretical but not executable options.
- THEY UNDERSTAND THE REAL ESTATE MARKET – Aside from the nuts and bolts of the loan, you need a mediator that understands things like property valuation, interest rates and other market trends. Although not restrictive like guidelines and regulations, this information is important when making decisions on the timeline or the value. For example, I had worked in the lending industry for decades before getting my mediation training and credentials. I originated millions of dollars in loans and doing this required me to know the aforementioned things. This skillset, experience and perspective can be essential in determining the best solution.
- OWNERSHIP – Ownership is one consideration that many people ignore and different types of ownership matter. The implications of changing ownership can cost you money and, under certain circumstances, claim to the property. I hear about clients’ plans to change ownership prematurely and without weighing the costs of executing a change of ownership. This is not to say they will give you tax advice for issues like the exemption on capital gains as that is the job of your tax professional, but they can ensure that you are aware of the issues and the possible adverse outcomes for making an uninformed change.
- PLANNING – Even without a final solution, there are things that you can do to set yourself up for success, especially when one spouse is buying out the other. Because they know the guidelines and how to best structure a plan to optimize the possibility for success. Like ownership, lack of preparation and a plan that does not sync up well with the lending process can cost you money and in the worst cases the home.
- THEY GENERALLY COST LESS – Because of the focused nature of a real estate focused mediator, you will likely see a lower cost than you will generally see with a mediator who manages other issues and considerations. Additionally, if the home is all that you need to resolve, you can stay focused on that single item which usually requires less time. This even more pronounced when a mediator has credentials such as a law degree. These are definitely a benefit in some situations, but if all you need to resolve is the home, they may be unnecessary. Additionally, in many situations, these mediators have their go to lenders who know the issues and considerations for disposition of the home. In some cases, you may be paying them for their time when the interface with the real estate professional. When every dollar counts, this may not be the best use of your money. In some cases when the scenario is complex and inclusive of other issues like kids, retirement assets, pensions, etc., you may even be able to have mediators work together in a co-mediation model where one helps with the home and the other covers everything else.
So, there you have it. It basically boils down to recognizing that if you have a home and are getting divorced a mediator with real estate experience, lending experience or both. Think of how much time you spent when you bought and how hard you vetted all the professionals. If this was a priority then, isn’t it as important to have the right people helping you during a divorce?