Wednesday, November 19, 2008

Divorce - Foreclosure Style

An already messy time made even more messy with falling house values. Homes - once an asset that couples fought over are now liabilities that couples are fighting to get away from. An amicable split can turn into messy and complicated divorce thanks to an unwanted property. Here is an article from Miami Herald about some of the problems in an article titled When couples split, the home is a hot potato. Lets take a look -

During the real-estate boom, couples who divorced would fight over who got the house, betting that the winner could get rich from rapidly escalating prices. Spouses plunked down thousands to buy out their partner. Disposing of the ''marital asset'' was easy, since homes were selling in a day or two for inflated prices.

Now, in a twist on the classic divorce dispute, houses have become hot potatoes for couples divorcing during the downturn.

Falling property values have turned many homeowners upside down on their mortgages, meaning they owe more than their homes are worth. Negative home equity has made it much harder for divorcing couples to disentangle their finances.

''Instead of an asset where they used to fight for occupancy, possession and ownership, they're now fighting to abandon their personal interest,'' said William Koreman, a divorce lawyer in Hollywood. ``Neither of them wants the property because they would be accepting a huge liability.''

In extreme cases, a homeowner has used the mortgage as a weapon of spite, deliberately sabotaging his or her own credit to destroy the credit of the former partner, said Adam Franzen, a Fort Lauderdale family lawyer.

Hard times getting even harder with falling home values. This can get even uglier and confusing when children are involved.

Near the end of the article is a quote from a wife going through a messy divorce -

``If it goes into foreclosure . . . you have to live and move on. I don't think anybody is concerned about their credit anymore. Everyone's credit is shot.''

We have been predicting this for some time - a huge population will have bad credit that bad credit will not mean what it once did. Foreclosures have already lost a lot of their stigmas. Bad credit will not have the harm it was once predicted to have. Perhaps you will not be able to buy a property for a while - probably will turn into a positive for people rather than a negative.

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