How to protect your home equity in a divorce


IMG_1226Reader Question: I am separated from my husband. Instead of selling the house he wants to buy me out. He is a Realtor and wants me to pay 3% commission to him for this transaction. Is this legal? Rachel D.

Monty’s Answer: Hello Rachel, and thanks for your question. The simple answer is that it is legal to pay a licensed real estate agent. States establish certain rules for determining the actions that create a contract. For example, a written contract that describes the property, the price, the term of the agreement and the amount or percentage of compensation is some of the rules in most states.

Food for thought

More significant, although you have not asked this question, is how the value of the property will be established? If your soon-to-be ex-husband wants to be paid a fee, he will have a legal obligation to represent you fairly in the transaction. There is an inherent conflict of interest here as he is both the buyer and the agent.

Strongly consider engaging an appraiser licensed by the State to evaluate the home and render their opinion of the home’s value. Additionally, consider engaging a real estate agent other than your husband or one known to him to render a third opinion of value. There is an article titled “Valuing a home when buying or selling it” at that explains why several opinions of value are important.

Which appraisal is accurate?

Chances are the opinions of all three sources will be different, and they can vary widely. Another article on titled “Challenging a real estate appraisal” explains how to understand appraisals. It may be helpful.

Lastly, if you have not already done so, you may consider visiting a good attorney that specializes in divorce proceedings. Can your husband qualify for the mortgage on the property alone? Will you be removed from the mortgage? When starting a new life on your own, make certain that the division of property is fair.



Seek alternatives to halting loan payments

Reader Question: Monty, we are trying to sell a manufactured house. We have people interested, but the banks make it impossible for the buyers to get a loan. We own the property and the loan is on the manufactured home itself. It is on pillars. We’ve thought about just letting the house go back to the bank and making them remove the home off of the property. What would be the downfall of doing that? Ginger P.

Monty’s Answer: Hello Ginger, and thanks for your question. The downfall of allowing a loan of any kind go into default is that it will affect your credit. If you can get credit in the future, it could result in higher interest rates, tarnish your reputation and discourage potential employers.

Research your records carefully

The fact the home rests on “pillars” may not have a bearing on whether the lender has a mortgage. For a home to be financed by HUD approved lenders, it must be considered real property and affixed to an approved foundation. Is this law the source of your buyer’s frustrations? Examine the loan documents closely. Are the words “mortgage”, “first deed of trust”, “mortgage note” or some similar sounding title in the documentation? I would be very careful about assuming that the loan is against the home but not the land under it.

Ask the lender holding the loan if they believe they have a mortgage on the property. There may be a surprise with the answer. At the same time ask if they would agree to a “short sale” on the loan as buyers that have been interested are unable to obtain financing.

Sources of manufactured home loans

By searching for “manufactured home loans” online you will find a number of resources that promote this type of loan. Here’s an article about financing manufactured homes: The article names several lenders in this category that you may want to check out. I am not endorsing them as I have not done business with them or even read their online material.

Your question does not say how much is owed on the loan, or the asking price for the house. It may be to your benefit to seek further professional guidance before stopping regular payments. An accountant, a real estate attorney or even an HUD approved housing counselor can help to make certain you understand the consequences.






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