Real Estate: Albatross in Divorce?
Years ago, a wise lawyer published a column in the Pittsburgh Post-Gazette to advise her readers about family law issues (Patricia G. Miller, Esq., “Legal Eagle”). In one of her best-known articles, she described the most common mistakes made by women in divorce cases. (Later she published an article describing men’s most common errors.) Her words, now time-tested, ring even truer today. The most common mistake was sacrificing cash flow to keep the marital residence, becoming “house-poor.”
Pat Miller felt that some women had invested so much time and energy in creating a hospitable environment for the family that they could not bear to part with their life’s work, even though keeping the house would mean sacrificing liquidity and cash flow that they would need to support themselves and maintain their property.
I was reminded of Pat Miller’s article when I read an article recently in the Washington Times. The article, entitled ” The art of selling a home despite a marital split,” noted that real estate has become an albatross in some divorce cases where the value of property has decreased dramatically in the current recession. Properties that once had equity may be under-water in today’s declining real estate market. As a result, a spouse who wants to keep a house may have an asset with negative value. Worse, it may be impossible to refinance a mortgage to relieve the other spouse from the obligation.
A long-term perspective might help to resolve these situations but sometimes there is no choice other than divesting property that has minimal or negative value. In a tough economic climate, a pragmatic approach must be considered. Sentimentality may be costly.