4sale by divorce october 2016

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4 S A L E B Y D IVO RC E Divorce & Real Estate October 2016 Issue

DID YOU KNOW? Every state in the country saw prices appreciate over the last year.

Marital Liens, Lis Pendens & Real Estate Lis Pendens are notices that warn the public of lawsuits that affect real estate. They are often used in divorce cases to prevent one spouse from transferring real estate without the other spouse’s knowledge, and they serve to protect the spouse’s interest in the property until the spouses reach a settlement or a judge decides how to fairly divide the real estate between them.

Failing to record a lis pendens during a divorce may lead to property loss. A purchaser

With the resurrecting housing market, the marital home is likely to once again become a marriage’s main asset for purposes of property distribution.

may innocently buy real estate involved in a divorce unless a recorded lis pendens warns him not to.

As such, prudent family law practitioners must be deliberate in drafting unambiguous marital liens, specifying applicable interest rates and enforcement remedies, to ensure that the intent of the lien is realized as a just and equitable division of property in the dissolution proceeding.

its own set of statutes governing the requirements of lis pendens. Because a judgment for divorce

The national appreciation chart on this page shows the average appreciation rate in the U.S. for the 3rd quarter of 2016.

Phillip H. Lande RE/MAX Legends Group/ Atlas Group Direct: 317.863.2356 plande@atlasrealty.com www.remax-atlasgroup.com

An innocent purchaser may need to give the property back, even if a judge later awards it to the selling party in the divorce. A recorded lis pendens may also help protect a spouse’s property interest if the other spouse files bankruptcy. It provides a recorded interest and a higher priority over other unsecured creditors in bankruptcy court.

Generally, a final judgment for divorce discharges a lis pendens; however, each state has may discharge a lis pendens, many times the vacating (Continued on page 2)

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Marital Liens, Lis Pendens & Real Estate Cont’d. spouse will have a marital lien placed on the property to protect their interest that was awarded them during the divorce if their interest is to be obtained from a future sale or refinance. A Marital Lien is also considered a ‘notice’ of lis pendens and will reflect in the property title searches.

When a Marital lien is going to be placed or is already in place on a property, it is important to recognize the following important mortgage guidelines. These guidelines should be considered in the event future mortgage financing is required for the marital home.

Rule #1. The balloon date for a subordinate marital lien should be longer than 5 years. If the mar ital lien created in the divorce decree will NOT be satisfied by refinancing, the subordinate lien must not balloon within 5 years, per Fannie Mae guidelines. However, if the party keeping the house does not need to refinance OR the lien will be paid in full with a refinance, then this rule doesn’t really matter.

Rule #2. The marital lien amount should be discussed in the “Homestead” section of the divorce decree. Sometimes a dissolution decree will attach an appendix, summarizing the asset and debt division and creating a ‘cash equalizer,’ with a net amount owed to one party. Placing the owed equity from the marital homestead in the appendix will cause the refinancing to pay off of the equalizer and to be treated as a ‘cash out’ transaction, and will in turn place restrictions on refinancing (e.g. higher interest rate, limited loan to value ratio (LTV).) However, if the lien is discussed in the homestead section of the decree, as a ‘marital lien’ specifically, it will be considered as a buy-out of equity in the home and the transaction will be treated as “rate & term” by lenders, with typically allowing for a higher LTV ratio and lower interest rate.

Rule #3. Shared percentage liens must include a dollar amount at the time of entry of decree. At the time of entr y of decr ee, shar ed per centage liens must include an actual dollar amount. Recently, it has been common for both parties to share in the future equity of the home in what is called a floating lien. This is supposed to be in lieu of a fixed dollar amount, but lenders need to calculate a combined loan to value ratio when refinancing. Consequently, an exact dollar amount is still needed. This lien can be modified over time if certain language is included in the decree, but an actual dollar amount with which to start must be stated.

Rule #4. Calculation details needed for “Floating Liens.” If you choose a shared percentage lien or floating lien, take care to be specific regarding the formula for net proceeds division. Make sure that everyone agrees to the calculation method so that the clients, underwriter, and title company know how exactly everything is to be paid out.

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A Little Humor

Property Ownership and Divorce Different states have different ways for holding title and it is important to understand the consequences of divorce on how title is currently vested if it is not addressed within the divorce settlement agreement. The most common ways for married couples to hold title are:



Tenancy by the Entirety

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Tenancy in Common / Joint Tenancy

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Community Property

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Joint Tenancy with right of survivorship

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Living Trust

Tenancy by the Entirety: A type of concur r ent estate in r eal property held by a Husband and Wife whereby each owns the undivided whole of the property, couples with the Right of Survivorship, so that upon the death of one, the survivor is entitled to the decedent’s share. A Tenancy by the Entirety allows spouses to own property together as a single legal entity. Under a Tenancy by the Entirety, creditors of an individual spouse may not attach and sell the interest of a debtor spouse: only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety.

There are three types of concurrent ownership, or ownership of property by two or more persons: Tenancy by the Entir ety, J oint Tenancy and Tenancy in Common. A Tenancy by the Entir ety can be cr eated ONLY by married persons. A married couple may choose to create a joint tenancy or a tenancy in common. In most states a married couple is presumed to take title to property as Tenants by the Entirety, unless the deed or conveying document states otherwise.

The most important difference between a Tenancy by the Entirety and Joint Tenancy or Tenancy in Common is that a Tenant by the Entirety may not sell or give away his interest in the property without the consent of the other tenant. Upon the death of one of the spouses, the deceased spouse’s interest in the property devolves to the surviving spouse, and not to other heirs of the deceased spouse. This is call the right of survivorship.

Tenants in Common do not have a right of survivorship. In a Tenancy in Common, per sons may sell or give away their ownership interest. Joint tenants do have a right of survivorship, but a joint tenant may sell or give away her interest in the property. If a joint tenant sells her interest in a joint tenancy, the tenancy defaults to a tenancy in common and no tenant has a right of survivorship.

Equally important is to recognize the default effect of a divorce judgment on current title vesting. The entry of a judgment for divorce terminates the tenancy by entirety and converts the form of ownership to tenancy in common. Additionally, joint tenancy is not severed upon the entry of judgment for divorce. When distributing ownership of the marital home during a divorce, it is important that the divorce settlement agreement address how title vesting is to be held.

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Phillip H. Lande ABR, ASP, CDPE, CRS RE/MAX Legends Group/ Atlas Group 5645 Castle Creek Pkwy N Indianapolis, IN 46250 www.remax-atlasgroup.com plande@atlasrealty.com Direct: 317.863.2356

As professional real estate agents specializing in helping divorcing couples, we are here to help both parties involved through a smooth yet emotionally difficult process when they need to sell the marital home and purchase new homes moving forward.

As a member of your professional divorce team, our goal is to: 1. Help clients understand the legal and tax aspects of divorce in regards to the sale of the marital home and other real estate.

2. Offer alternatives to the usual mistrust and the emotional responses as a result of dividing real estate assets.

3. Work with both parties together to help them save and make money now and down the road with regards to real estate.

4. Work with both parties, not just one, in selling the marital home for the best price.

Please don’t hesitate to call us if we can be of service to you and your divorcing clients!

R E A L E S TAT E

S T R AT E G I E S FOR DIVORCING COUPLES

With the divorce rate stable at fifty percent and home ownership at sixty-two percent, there are a lot of families who need professional guidance as they navigate what to do with their home. For most people their home is the largest asset they own, so the decision must be carefully thought out and analyzed. Now more than ever a full time local Realtor must provide professional guidance. This is not the time to take the real estate advice of family, friends or other professionals. While your legal adviser or family member who lives in another state means well, real estate still remains local, particularly with our mercurial national market.

The sale of the marital home is not an isolated decision. There are short and long term financial, emotional and tax consequences. A Realtor, preferably one who specializes in divorce, can offer the best guidance regarding the marital home. They must understand that they will work in tandem with other professionals for the best customized outcome.

The goal should be a client that has their individual needs met and is making informed decisions from a knowledgeable place.

This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Not a commitment to lend.

Copyright 2016 All Rights Divorce Lending & Real Estate Association, LLC

The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes. This Newsletter is not to be reproduced or edited in any format without the written consent of the Divorce Lending & Real estate Association, LLC.