Divorce – what to do with the house?

One of the questions that must be answered in divorce is “What do we do with the house?”

If you’ve needed your combined income to maintain the payments on your home, neither of you can handle it alone, so you’re forced to make a decision.

One choice is to keep the house and rent it out to cover the payments. Another is for one of you to remain in the house and rent a portion of it to assist with payments. However, renting does come with its own problems. One is compromising the tax status. The other is dealing with tenant issues such as collecting rents and performing “fix-up” duties after a tenant moves out. Your neighborhood zoning may also be a factor.

The other choices are selling or letting the house go into foreclosure.

Selling your home is always the best option.

If you have equity in the home, this is obviously the easiest and best solution. But even if your home is “underwater,” selling as a short sale is not only possible but will be more beneficial to both of you.

*Should you short sale or shouldn’t you? Call 619-929-1413 or write td@tomdunlap.com to get advice from San Diego’s top short sale specialist, Tom Dunlap.

When You Let Your Home Go Into Foreclosure…

At first glance, this might sound like a good option. One of you can remain in the home without making payments until a foreclosure is final. With many lenders taking a year or even longer to complete a foreclosure, that would give you breathing space and time to put away some funds before needing to find a rental. At the very least, you’ll have about 6 months from the time you make the last payment.

But this option does have drawbacks. First, it will severely damage your credit scores and thus your ability to rent or buy a home in the future – and even your ability to get a job. And unless only one of you signed the mortgage documents, this damage will apply to both of you.

It doesn’t matter if the divorce decree gave the house to one spouse. What matters is whose signature is on the mortgage loan application(s).

Next, if you have a home equity line of credit, the second lien holder can sue you and obtain a deficiency judgment. And, just as everyone’s credit scores will suffer, this judgment will obligate anyone whose name is on the application.

Finally, if you allow your house to go into foreclosure, you’ll both be ineligible for a new mortgage loan for from 5 to 7 years.

Good reasons to choose a short sale instead

Your credit scores will take a smaller hit and notice of the short sale will “fall off” your credit report in seven years rather than ten.

The time before you can get a new loan will also be shorter. After the short sale of a home, if you meet the other qualifications, you can get a new mortgage in as little as 2 years.

Short sale consequences are far less severe than the consequences of a foreclosure…

So if you own a home in California and are facing divorce and loss of income, think seriously about a short sale.

Call 619-929-1413 or write td@tomdunlap.com to ask your questions and tell us the situation. He’ll give you straight answers.

First, he’ll be happy to help you determine whether you do have equity in today’s market. Then, if you need to short sale your house, he’ll explain the real estate short sale procedure and answer all your questions.

Tom specializes in short sales and over the past several years has maintained a 98% success rate in getting short sales closed. So get in touch. He’d like to help you avoid foreclosure, too.


Please note that the information provided on this San Diego short sale page is generic, academic information used for general information purposes and may not be construed as or relied upon as a promise for a specific outcome.

This site provides information about real estate, law, income taxes and credit scores as relates to borrowers in distress, short sales and similar situations. The site is designed to help users safely cope with their own needs. Information is not the same as advice — the application of law or regulations to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer, tax adviser or other specialist if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation. The models in photographs accompanying the testimonials on this website are used for illustrative purposes and are not a personal endorsement.