I’m Getting Divorced and My House is Underwater



If you’re getting a divorce and own a house that is not worth what you owe on it, first of all, I’m sorry, that’s never a fun situation to be in. 🙁 In these situations, it can be difficult to come to an agreement with your ex partner. Even in an amicable separation, compromising will take patience and clear communication. But the good news is, there’s a way out and we’ve got some tips regarding how to sell your house during divorce.

Before considering the options below, both parties should create budgets and know what is feasible and also what their short term and long term goals are. Having this information will (hopefully) help you both to come to a decision regarding your options. Here are a few possible solutions regarding houses worth less than is owed on them in a divorce.

One Spouse Keeps the House

One option is that one spouse will keep the house, subject to the negative equity, with the understanding that there shall be some offset and consideration given in trading this negative asset for other property. The housing market is subject to change. If one person can afford to remain in the house, it is possible to rebuild equity. However, this is not typically the most ideal situation because many memories have likely been built together in that home, and they may not want a reminder of them. In some cases it may be better to start fresh in a new home where you can begin your new life.

Walk Away From the House

The second option is when the encumbrance is too large and the payments are overly burdensome, some couples will just agree to walk away from the home. In some cases, one party will stay in the house, without making any payments on the mortgage until the home is actually foreclosed upon and then there is a sheriff’s sale, which can take many, many months.

Short Sale or Sell to an Investor

A third option is to try to sell the home, and work out a short sale with the bank or sell the house to an investor. This can happen in some situations, but bear in mind that if it is not handled properly, it can negatively impact your credit.

Even in situations where there is equity in the home, do not become overly enamored with your property. Sometimes it makes sense to try to sell the house. Every divorce should be handled on a case-by-case basis, bearing in mind that your situation is not the same as your friend or neighbor’s. Even if you can afford the house, if it is going to take too much of your income to keep the house, it’s probably better to sell it.
If you have questions about selling to an investor, or about purchasing an unwanted property, contact us for more information.

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