By Douglas Katz – 06/21/2022
U.S. News and World Report recently published a great article titled Ways You’re Making Your Divorce More Expensive, which had some amazing advice. While not focused on any part of the process, they had some fantastic advice that aligns closely with what I as a Certified Divorce Lending Professional and Divorce Housing Pro feel needs highlighting and a deeper dive from a housing perspective as in many cases that is one of the largest assets that will need fair and equitable disposition.
In the article, the author recommends that divorcing couples talk BEFORE involving the lawyer and the author directly references the home. I cannot agree enough that going in with some degree of a plan is the best way to good outcomes. Many divorce lending professionals like myself also have training and certification in areas such as mediation. A holistically capable lending professional with these skills and abilities can get together anything from a rudimentary plan to detailed guidance that you can take to your lawyer before they are on the clock. As long as you go into pre-lawyer discussions with an open mind and an understanding that there will rarely if ever be an agreement or judgement that inequitably favors one spouse, you will be better off. This also allows you to identify issues with maintenance, child support, home affordability, ownership and title as well as a host of other considerations. This will make things run more smoothly and minimize the need to renegotiate solutions when you find out you cannot execute them due to loan approval guidelines or regulations. This happens way more often than you would think and I have personally seen the divorce process stall when this happens.
The author also says that you should use lawyers as little as possible. To this I agree, but with a twist. I personally tell anyone who asks me to use lawyers appropriately not sparingly. While many people have a preconceived notion of attorneys, they would be surprised to know that most attorneys feel the same way. So many jokingly reference their status as an extremely expensive therapist, CPA, financial advisor and even mortgage provider. While they can bill for the time that these ancillary roles are addressed, they would rather practice law and not have the client overpay (hint – many clients still don’t listen). Many if not all will coordinate with a professional in that space on your behalf if needed, but why not pick that provider yourself, interact with them on your own and have them collaborate with your lawyer. On the home front, where there is a lot that can go wrong and the time discussing and resolving the issues can be time consuming, you want to minimize legal fees, even if you need to pay the other professional.
This is a good point to address the trend toward getting divorced with limited scope representation from an attorney or even pro se divorce or divorce with no attorney which is best used in simple situations where mistakes are minimally impactful. Regardless, both of these options are by design are intended to save money, but this does not mean that you should go it alone. More often than not, divorcing couples with any degree of savings, wealth or assets need help and some attorney engagement as mistakes and issues down the road will cost time and money to resolve. This is again a time for you to drive the bus and get the right professionals to help.
Finally, you need to think of savings in terms of avoiding additional costs. I have seen so many divorcing couples make assumptions about what can be done and what cannot. I wrote a bit earlier in this article about having an executable plan for the home, but did not fully articulate the cost of one that is not. First and foremost, delays in a market where home values and mortgage rates change are perilous. We WERE lucky prior to 2022 these areas, but unless you live under a rock, you know that rates are up by several points in the last few months and home values are likely headed downward. If rates jump during the delay, your payment will go up when you apply for the loan. The last rate spike increased rates by several points and over the life of the loan, you will pay more. In the worst situations, you could enter a point where a deal cannot happen and you may pick up the costs of a home sale and a move. These are just two examples and there are a lot more and most will cost you dearly.
So my advice, is to pick the right professional for the right need. As the author says weddings and other life events cost money and you likely worked through a lot of competing demands to come up with a great event that also fell within budget. Divorcing couples tend to forget this. Whether due to emotion and anger clouding judgement or just not thinking through a rough divorce budget, logic and rational approach tends to cause bad decisions. When you look at this like any other big event or milestone, albeit a painful one, it becomes a simple matter of optimization.