Complex short-term mortgage question

This is really a GQ question, as I only want factual, considered answers, but I suspect it would be moved here along with most legal/financial/opinion-driven topics, so.

Here’s the deal: I need to know everything Doper lawyers, RE brokers, financial gurus and other savvy types might now about delayed sale of a house. Here’s the situation:

House is relatively new and in a good, desirable neighborhood. It should sell quickly when it’s listed; most houses here sell in a few weeks unless they have some big drawback. Let’s say it’s a nominal $500k seller. There is no mortgage. Parties A and B, who shall remain otherwise nameless, basically agree to split the house value. A wants to sell the house immediately (and divide prep and broker costs). B wants to sell the house next fall (Aug 2018) and take a slightly smaller settlement in return - it’s been suggested that B eat prep and broker costs and the division be made of the actual selling amount. All fair enough.

What are the options, and what’s the best option, for an instrument to secure that half-value? A no-payment balloon mortgage of 18 months or so? Or what? What would give the following qualities:

[li]Assures house will be sold for maximum value;[/li][li]Defines split of selling proceeds rather than fixed value;[/li][li]Perhaps has a floor share price ($200k?) for security;[/li][li]Has rigid costs and penalties for nonpayment/nonconclusion;[/li][/ul]
…and in general binds B to sell the house at best price and pay over 50-55% with all due speed, and has the fewest loopholes and potential hazards?
And ideally… is a negotiable instrument that could be used for collateral or even resold like a mortgage (so that A can pledge it against a new house purchase)?
Anyone? Bueller?

I don’t think there’s a legal contract that forces someone to sell a property. And I can’t imagine a contract stating they must to be desirable to a lender as a sort of collateral. Just b/c something makes sense to you doesn’t mean a lender will agree. You may need to look at non-traditional (high interest, usually) lending options.

It seems you’re trying to get cash in hand to start your new life ASAP and hoping to find a way to guarantee getting cash from the house sale to pay that cash back. Your wife wants more time to live in the home before selling it.

What does your divorce lawyer say about this?

The conditions that you want to attach should be laid out in your separation agreement or divorce settlement, you can’t expect them to be attached to a loan.

It seems to me that the simplest arrangement is a home equity loan for around half the value of the house, which should be straightforward to obtain if there is no mortgage and you (or she) have good credit. The cleanest thing for you is that your ex takes out the loan in her sole name, you get the money free and clear as part of your divorce settlement; your ex gets the house in her sole name and the loan liability in her sole name, and it’s down to her to sell the house whenever she chooses, and to pay off the loan and keep the difference. Of course, she may not be agreeable to that, I suspect you might have to sweeten things a little to get her to agree to that. Perhaps you agree to adjust the economics so that the loan is effectively interest-free for her for the first year.

Any arrangement where she continues to live in the house, owned by both of you, seems a can of worms, as you are obviously aware. You need to make sure that you have a mechanism to enforce the sale. One way might be that she commits to vacate the house by a specific date whether or not is has sold, with specific financial penalties if she fails to do so. Once she has moved out, she automatically has just as much interest in selling the house as you do.

Actually, on re-reading, I’m less certain what you actually want to achieve. Do you need your share of the cash right away, or are you just concerned with enforcing that the sale goes through at the later date that she has specified?

ETA: part-ninja’d by Reimann.

My wife’s a banking attorney. She’s not directly in the mortgage biz but she’s advised one bank or another on innumerable mortgages that got fouled up in the course of convoluted divorces, deaths, etc. She’s also not licensed in your state, not providing specific advice, etc.

  1. Never say never, but the odds are very slim any bank-like entity will be willing to loan you anything like you seem to want. Far smarter to plan to mortage the new place rather than mortgage the old place to get money to buy the new place for cash.

  2. You’re not going to be able to make a meaningful contract to force the sale, or even the attempt at the sale on some future date certain. Nor can you say today anything much about what it will sell for.

  3. You *can * make what amounts to a lease where the person staying behind in the house pays the mover-outer half of the market rate for leasing a comparable house nearby. This can be for a fixed term, say 12 months. This is probably the simplest and lowest overhead way to split the money difference between sale now and sale later. But …

  4. Whatever arrangements you make, right now cooperation is enforced by the judge needing to approve the divorce and both parties are cooperating (through gritted teeth if necessary) to get that done. Once folks go their separate ways, the desire for further cooperation declines quickly to zero. The person moving out needs to assume the stayer-behinder person will lose interest in paying the “lease” or in selling at the end of the “lease” or in doing anything else. The status quo will be just as comfy to them a year from now as it is right now. Expect to have to go back to court to enforce each and every delayed term of the settlement. Which costs money and time and aggravation and delay.

  5. The way to avoid all that is for the stayer-behind person to buy out the mover-outer at the current market price. Taking a one-person mortgage or HELOC if necessary to generate the cash. Once that happens, the mover-outer no longer cares what happens to the house at any future date.

  6. If the house is a big chunk of the marital joint assets this is too important to foul up. Mover-outer needs to stand his/her ground.

  7. The divorce judge will approve almost any arrangement you two can agree to unless it’s obviously grossly unfair. Said another way, you can agree to something colossally stupid that *will *fail in practice. The judge will OK that bad plan as long as you’re both in it sorta-equally. So don’t take the fact the judge or referee is making favorable noises as any kind of proof you’re doing something smart.

  8. Good Luck. This situation sucketh greatly.

When I got divorced, the ex and I agreed that I would keep the house and buy her out. We hired a licensed appraiser to determine the value of the house. I refinanced the mortgage for what was previously owed plus half of the equity. I gave her half of the equity and she signed a Quit Claim to get her name off of the title. The Title Company took care of all of the paperwork.

I could have sold it 18 months later or 5 years later or, as actually happened, not at all going on 12 years. You don’t want the house. She still does. You should do what I did and you’re protected from a future drop in value, the house getting destroyed in a natural disaster or your ex changing her mind.

The short answer to a lot of questions is this: I would like to take my half of the house now, with me, so I can move forward. It’s only about 1/3 the total assets, so it’s not make or break except that to stay liquid I’d need it to buy a new house (much smaller).

So for her to stay another year or so (very unlikely she’d stay after that - many reasons for the year and no longer) I need a solution that does not leave her cash-poor or me waiting for funds that might shrink or get held up.

What kinds of mortgages might be written for say, 24 months or less with minimal interim costs? She mortgages half the value, I get it in the settlement, she sells the house and pays off the mortgage in 12-15 months and keeps all proceeds. Am I right in that some mortgage companies will write any (secured) loan structure that makes sense?

Hell, there’s nothing stopping her from getting a 15 year mortgage and paying it off very early (so long as there’s no prepayment penalty). But there’s little a mortgage will give you that a HELOC will not. The nature of a mortgage product is to make the bank a certain amount of profit over several years and you aren’t offering them that.
What benefit do you think a HELOC deprives you of in this situation?

None. I’m open to all suggestions and that’s a good one.

The problem is that we’ve been going back and forth on this point as related to others, so too many ideas are in play. I think waiting for my share is a bad idea, no matter what it costs in the present. So either a short mortgage or a HELOC is probably the solution.

But all input still solicited. It will depend on an appraisal (Zillow is about 10% more than we paid for it six years ago), and ideas on how to make that process fair and quick are also solicited.

Yeah, divorce lawyers. We’re both trying to bring as much to them as wait for their processes and hourlies. :slight_smile:

What’s wrong with what I suggested? You don’t use zillow, you get a licensed appraiser. She gets a new mortgage and then sells whenever she wants and pays that mortgage off.

Or even more fairly, each spouse engages their own appraiser so there can be no question about bias.
But the reticence to do these things is understandable; once one pays a professional for their opinion and begins that process, this dissolution is no longer an abstract idea backed only by filled out and filed forms. It is real, it is happening and pain is really headed your way.
After two decades together none of this will be easy and some of it won’t feel fair or sensible.

If she wants to defer selling, then I agree that you should push hard for her to buy you out now. The loan will be her loan, so it’s really her choice how best to borrow the money, depending on her plans. If she really plans to pay it off in a short period, a home equity loan may work out simpler and cheaper, especially if it’s only 50% of the value of the house and there is no other mortgage and she has good credit and a job. There should not be much difficulty in getting a loan at a good rate under those circumstances.

If she’s willing to do this, I personally would not go too hardball on the appraisal. Getting the cash now and not having to worry about dealing with her & the house in the future is worth a huge amount in my opinion.

You say the house is worth $500,000 but this is 1/3 of total assets. So total assets are $1,500,000. So why not simply she gets the house and $250,000 of the other financial assets and you get $750,000 worth of financial assets?

Bumping in hopes of an answer that doesn’t sound like a power thing.