If you anticipate a divorce the first thing you should do is consult with an attorney experienced in the county where you will be filing for divorce. They will be able to advise you as to any local rules or the local Judges’ tendencies, which outside attorneys may not be familiar with.
What you will need to do is to start retrieving documents relating to the value of your property and any non-marital contributions you made to the property. Good documentation wins cases. If you invest non-marital money into marital real estate, it is crucial that you be able to trace your non-marital investment. If you cannot prove a non-marital claim, Kentucky Courts will determine the property is marital and it will be divided accordingly. A person may need to hire an appraiser if the value of the real estate is in question. It is advantageous to wait to hire an appraiser until you are sure there is a dispute.
There are generally two ways to handle property with a marital value in a divorce. The first is that the property is sold and each person receives their respective shares. If this is the case it is helpful to contact a real estate agent early. They can help set realistic expectations for sale time and price. Additionally, if they recommend any improvements to the home prior to the sale it gives the couple time to perform the improvements so they can maximize their profit. Each party will be starting a new life so maximizing the return to each spouse is extremely important.
The second way is for one person to keep the property and pay the other for their share. Assuming our couple is Jack and Jill and Jack intends to keep the home, he will have to refinance it if Jill’s name is on the note and/or mortgage (if it is only in Jack’s name he does not need to refinance). It is helpful to check credit scores and talk to a lender early. It is generally wise to wait to refinance until there is a written agreement or court order but it is important to determine at an early stage if refinancing is an option. There is no reason to spend time negotiating an agreement (or fighting in Court) for an outcome that may not be possible if someone doesn’t qualify for a loan.
After the divorce there is usually a specified period in which one spouse has to refinance. If the person refinancing has already been in touch with a lender (and is already pre-qualified) this should be no problem. Generally, if Jack is keeping the property, Jill wants him to refinance so she will not be responsible for the monthly payments. Jack wants Jill to sign a quitclaim deed transferring her ownership interest. If the refinance occurs first, Jill has no more responsibility for the mortgage but she still has an ownership interest, which is not what Jack wants. If the quitclaim deed occurs first, Jill gives up their ownership interest but she is still responsible on the mortgage, which is not what Jill wants. It is best that the refinance and quitclaim deed happen at the same time. If a person wants to be completely free from a piece of real estate they need to make sure that all loans they were on are refinanced and that they quitclaim their interest to the other person.
If one person won’t sign the quitclaim deed, sales contract, or other necessary documents, there are several ways to address the issue. Unfortunately, most of them require going through the Court. An attorney can advise you on the best option for your situation but rest assured, an uncooperative spouse shouldn’t stop the process.
We have just talked about refinancing and quitclaim deeds. Often people give the spouse who is keeping the property too much time to refinance. When you give your spouse an undetermined amount of time, or a time that is too long, it allows more time for something to go wrong or circumstances to change. This results in trips back to the attorneys’ offices. As for the quitclaim deed, it must be signed, even if the other spouse was never on the original deed. The quitclaim deed should not be signed or filed before the Judge signs the Divorce Decree. Not filing it or filing it too soon will both likely result in legal issues the next time the property is refinanced or sold.
Once the refinance and quitclaim deed have been completed, the property is out of one spouses name.
If one person plans to buy a new home it is best to wait until after the divorce decree is signed. If a home is bought before the Judge signs the final decree the other spouse has a marital interest in it. The marital interest may be purely statutory, in that it has no value, but is simply because it was purchased before the decree was signed. Still, there is an interest and then a quitclaim deed must be signed by the other spouse or it can cloud title if the property is ever sold or transferred in the future. If one person must buy a home during the divorce process talk with your attorneys about the paperwork that is necessary, which funds to use to pay the down payment and mortgage payments, and don’t forget the quitclaim deed at the end.
Occasionally we run into cases where the divorcing couple owes more than the house is worth. This will not prevent or effect the ability to get divorced but it does limit your options. When a house is upside down (i.e. the loans exceed the value) it makes it difficult to refinance or sell. A bank will generally not refinance for more than a house is worth. If you wish to refinance generally there will have to be a down payment in an amount large enough that the new loan amount is less than the value of the house. In the case of a sale there are several common options. The first is to sell the home and the divorcing couple has to pay the deficiency. The second is to contact the lender and work out a short sale or to surrender the property to the lender.
Real estate is one of the most valuable assets most people own. When going through a divorce it is important to protect your interests and make sure the paperwork is filled out correctly. When it comes to dividing real estate in a divorce it is much easier to prevent a mistake than it is to fix one after the fact.