OT: Real Estate and Divorce

[NoOneIsInnocent]

I was wondering if someone could answer the following questions:

Hypothetical example: Husband and Wife purchase a home for $500k
– Husband puts $100k as the down payment (20%) which is all money he earned/acquired/inherited BEFORE getting married (and it’s well documented so it’s not common assets)
– Wife puts $0 down
– Husband and Wife finance the remaining $400k with a 30-year conventional loan

Five years later, Husband and Wife file for divorce. By that time, the value of their real estate has dropped by 20% which means their property value is now $400k only.

3 possible scenarios:

A. Husband and Wife agrees to sell the house. If the house sells for $400k, does Wife owes any money to Husband (since he had a largest share to begin with)?

B. Husband keeps the house and Wife agrees to walk away. Does wife owe any money to Husband? And what happens to the mortgage? Is the Husband now solely responsible for the $400k balance (or slightly less since they paid off some of the principle over the first 5 years)?

C. Wife keeps the house and Husband agrees to walk away. Does wife owe any money to Husband since, again, he put 20% down at the time of purchase?

Thanks!

Phil

[spdrun]

Husband should have had a pre-nup to keep wifey from getting a dime.

[Hobie]

Probably could get the $100k back as pre-marriage assets.

Need sharp attorney to negotiate this as if she had nothing 5 years ago, she may want alimony on top of house sale proceeds.

Maybe if you can keep house ( assuming it will appreciate, like location, or have kids etc.) and pay her $150k ( Sale less husband pre assets then split remaining) you will run out of cash flow to pay alimony 😉 Total long shot.

[FlyerInHi]

Practically speaking, if I were the wife, I wouldn’t pay a cent.

If they sell the house, after selling costs, they have to bring money to the table, so practically speaking, there’s no money to fight over. So that ends it right there.

Mortgage wise, if it’s not refinanced in the name of person keeping the house, then both are still responsible to mortgage company, despite one quit claiming the property over to the other.

Also, if the husband decides to fight in court, unless there are total community assets to divide greater than his $100k downpayment, I doubt he will get very far. He’d be paying lawyers for nothing.

[Coronita]

.

[SK in CV]

Assuming we’re talking about California residents and California property, and there is no net equity in the home, the answers are pretty clear.

A. No
B. No, wife does not owe husband anything. If the only loan is the purchase money mortgage, the property itself is the only security for the loan.
C. No

If there is positive equity in the house, the husband is entitled to get the first $100K back first if he can trace the down payment from a separate account.

See Ca Family Code §2640.

[joec]

1st thing, you really should seek legal council from a family law attorney, not some housing forum here where people here have absolutely no idea how the law works in divorce cases.

That said, since you asked and since I’m a member of the divorced club, the situation really depends.

What I sense from how you worded your question and your “scenarios” (Honestly, there really is no SET scenario IMO), but they all sound like you (hypothetical you or friend) wants some money back since you put a good chunk of your savings into the house.

Honestly, I think you’re fighting a losing battle here and the money is gone. Also, if the house went UP in value, will you claim it was all your investment so you should get near all the gain?

All that said, from what I’ve read/did in my own situation, there is no “set in stone” ways to divvy assets, retirement, etc…

Someone can walk away with nothing, half, all, you name it. You just negotiate. I got a divorce without lawyers and didn’t split a thing since ex worked and had her own thing…but I feel if you argue this point with your (or your hypothetical friend), this is going to blow up in your (his) face and this is where legal fees will far strip any money at all.

Lastly, if there are kids, you should probably get a lawyer since there are a ton more complexities when kids are involved.

If it was me, I’d just look at it as a 100k “loss” / bad investment / marriage, whatever. Be happy it only “costs” you 100k and be wiser or just don’t marry again.

At the end of the day:

TL:DR: It depends, people can negotiate whatever they want, but be careful what can of worms you open.

[UCGal]

My understanding of things is the pre-marital separate assets became joint as soon as he co-mingled it in a jointly owned asset.

I’ve been told that premarital separate assets, or inherited assets, need to be kept separate – as soon as you comingle them, they’re joint.

I’m assume the title of the house was joint tenants. If the title was tenants in common, his percentage is laid out there.

[sjglaze3]

Just throwing in my 2c. This was exactly my situation when I divorced 8 years ago (I put $100K down from sale of property I owned prior to marriage). The differences though were that (a) we divorced when the market was high, and the property then had $300K in equity, (b) we used a mediator not attorneys and (c) my name only was on the mortgage due to spouse’s poor credit history. But technically, previous poster was right, if you comingle funds after marriage, they become joint assets.
Hope this helps, good luck.
Forgot to add that Yes, I did get my $100K back.

[CDMA ENG]

[quote=UCGal]My understanding of things is the pre-marital separate assets became joint as soon as he co-mingled it in a jointly owned asset.

I’ve been told that premarital separate assets, or inherited assets, need to be kept separate – as soon as you comingle them, they’re joint.

I’m assume the title of the house was joint tenants. If the title was tenants in common, his percentage is laid out there.[/quote]

Ahhhh… UCgal with your usual wisdom… How does one so young get so wise?

Now to crack wise…

You left out the fourth option which involves your ankles and a lot of discomfort.

But yes… Consult an attorney…

CE

[UCGal]

[quote=CDMA ENG]

Ahhhh… UCgal with your usual wisdom… How does one so young get so wise?

CE[/quote]

Not so young…
(Older than scaredy, but I think maybe younger than BG)
and often wrong vs wise… But I’m freely willing to learn from my mistakes.

[moneymaker]

I think the fair thing would be to recognize that the asset has deprecited 20%, hence so has your down payment. So if bought for 500k and sold for 400k then you both share a loss of 10k each. Now after 5 years your principal is 460k, subtract out 80k which leaves 20k,so wife owes you 10k. P.S.- I’m still in my first marriage so what do I know!

[FlyerInHi]

[quote=moneymaker]I think the fair thing would be to recognize that the asset has deprecited 20%, hence so has your down payment. So if bought for 500k and sold for 400k then you both share a loss of 10k each. Now after 5 years your principal is 460k, subtract out 80k which leaves 20k,so wife owes you 10k. P.S.- I’m still in my first marriage so what do I know![/quote]

Where’s the other $80k going to come from?

[scaredyclassic]

[quote=UCGal][quote=CDMA ENG]

Ahhhh… UCgal with your usual wisdom… How does one so young get so wise?

CE[/quote]

Not so young…
(Older than scaredy, but I think maybe younger than BG)
and often wrong vs wise… But I’m freely willing to learn from my mistakes.[/quote]

51.5

My little one is 12 today!

If you want to keep separate property separate, don’t mix it together. For instance I brought 3 valuable comic books to the marriage. If my wife had a comic collection I would not put our books together in one pile I’d keep them safe and separate.

as I have done so for 21 years. ALL MINE!!!!

[UCGal]

[quote=scaredyclassic][quote=UCGal][quote=CDMA ENG]

Ahhhh… UCgal with your usual wisdom… How does one so young get so wise?

CE[/quote]

Not so young…
(Older than scaredy, but I think maybe younger than BG)
and often wrong vs wise… But I’m freely willing to learn from my mistakes.[/quote]

51.5

My little one is 12 today!

If you want to keep separate property separate, don’t mix it together. For instance I brought 3 valuable comic books to the marriage. If my wife had a comic collection I would not put our books together in one pile I’d keep them safe and separate.

as I have done so for 21 years. ALL MINE!!!![/quote]
Yep. I was right. 53. Youngest is almost 12. (I was really old when I got married and started having kids.)

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