Who gets what when you get divorced? This is one of the questions most people think about when the topic of divorce comes up. The Answer? Equitable Distribution.
Equitable is not always Equal. Dividing up marital assets and deciding who has to pay which debts can be rather tricky, especially since the real estate crash. Beginning in 2007 and continuing until last year, many homes fell in value. Some Marital Homes lost more than 60% of their pre-crash value. Over 2013 we have begun to see reversals and many homes are once again gaining value and in some cases Equity. Is this the right time to file for Divorce? Call me at 407-645-3297 to set a time to discuss your particular situation. You can always visit my website at www.aubreylaw.com
Dividing Equity can usually be done either by trading other assets, including retirement accounts or buying out the other party's interest. Of course you know Equity is that portion of the value of the home that you own, that value above the mortgages. For example: A $250,000 home with a mortgage of $180,000 and a Home Equity Line of Credit (HELOC) of $20,000 would have Equity of $50,000. Were the owners to sell the home and divide the equity they could each receive $25,000 (Of course this assumes two owners, and no selling costs).
Equitable Distribution begins to get more complicated when the home is "underwater" owing more in mortgages than the actual value of the home. Owing more than a home is worth may lead parties to consider a "Strategic Default."
For example, someone who purchased their home in May, 2007, may owe more than twice what the home is worth. Home values in the Orlando area hit their peak according to Zillow.com (www.zillow.com) between May 2006 and August 2007. A home in the 32801 zip code purchased in May 2007 for $225,000 could be worth as little as $114,000 today due solely to market forces. Who is willing to pay the $200,000 mortgage still owing on the home that is worth so little today.
Strategic Default http://schott.blogs.nytimes.com/2010/03/26/strategic-defaults/ is the homeowners plan to default on the mortgage and stay in the home as long as possible, rent free, until the foreclosure is completed and the bank forces them out. The New York Times had this to say about Strategic Default. http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html You might think this is an awful thing to do, but the Home Mortgage Bankers Association did the same exact thing in Washington DC. http://dealbook.nytimes.com/2011/02/04/mortgage-groups-old-building-flipped-for-a-profit/
When homeowners face foreclosure, the extra stress can lead them to consider divorce as one alternative. If you are facing divorce, call me or visit my website www.aubreylaw.com
I will be here to help.
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