1. REAL ESTATE – KEEPING THE HOUSE
Have you watched the award-winning TV drama “The Good Wife” that revolves around a scandalized politician and his humiliated wife who leaves her comfortable suburban lifestyle to resume her legal career in order to take care of her family? The couple eventually sell the property as part of the divorce but in a plot twist later end up vying for buying the home again against each other when it comes back on the market. There’s the struggle of trying to arrange financing with not enough income or money for the down payment and the intra-family power struggle with the monied mother-in-law who is also trying to buy the home. There are the emotions of watching their kids growing up in the home mixed with the pain of the scandal and divorce.
You don’t have to be a high-powered couple to have this sort of drama even if it is on a different scale. One of the biggest mistakes that a divorcing couple makes is with real estate in general. For the majority of married couples in the Boston area and nationally, it is the biggest asset. It is tied up with all sorts of memories and emotions. Sometimes it becomes the symbol of power that one party uses like a club on the other.
In my experience working with divorcing couples in Massachusetts, this is the bottom line: Most divorcing couples make the mistake of keeping the house.
Later, when it is too late, the spouse who ends up “winning” finds out it is a “winner’s curse” when he or she comes to realize that he can’t afford it.
What usually gets overlooked is that there may now be a “single income” supporting two households trying to maintain the same lifestyle when there was only one household. Even if both spouses worked before the split, there’s still the same problem since it is human nature for most families to spend up to and often beyond their means. And now with two households to support, it doesn’t take long for someone to start feeling the financial squeeze.
There are the recurring mortgage costs or worse if you have an adjustable rate mortgage or variable rate home equity line of credit. There’s the ever-increasing property tax bill as cash-strapped municipalities try to maintain their service levels through increasing property tax rates as assessed property values drop. There are the maintenance costs or maybe new costs as you may now pay for outsourcing landscaping, pool maintenance or lawn mowing duties. And there are the inevitable and often unexpected costs for fixing things that break down around the home.
While it may be convenient for the kids and less disruptive in the near term on friends, families and schools, the reality is that paying for a home that you can’t afford is a sure way to end up back in court but this time for bankruptcy.
To help organize yourself, consider the tools available as part of your free Divorce Shield plan.