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Property division: does a short sale mean the short straw?

Mortgages and realty ownership can be complicated at the best of times. When a California couple divorce, the marital home may be dealt with in a number of ways. If there is no definite severing of rights and responsibilities on mortgage agreements and realty deeds, then problems may arise again in respect of property division, sometimes years following finalization of the divorce.

One couple who divorced were both named on the mortgage, however, the husband kept the house. Five years after the divorce, the house was subject to a short sale. The lender offered the husband $10,000 incentive as a relocation assistance payment, and his ex-wife felt that she was entitled to half of this payment. Despite the terminology used by the lender, the money need not necessarily be used for that purpose. Often, owners vandalize their homes prior to foreclosure or short sale, and lenders offer this incentive in the hope that the sale will be allowed to progress smoothly, with the realty left undamaged.

If the spouse who was living in the property was made solely responsible for all financial liabilities related to the property, and he had no outstanding financial obligations toward his ex-wife, then he would likely be entitled to keep the whole sum offered. In the event that he had failed to maintain mortgage payments, thereby adversely affecting his ex-wife's credit rating, then she may have cause to make a claim for damages on the cash offered. If the ex-wife is still deemed to be a co-owner of the house, then she may also be entitled to some of the incentive money. In addition, her agreement may be required in order to proceed with the sale, giving her some leverage.

It is always preferable for California residents to come to amicable agreements between themselves about property division. This is not only less stressful for everyone, but can also save both parties time and money that can be used in more positive ways. Where this is not possible, seeking advice and clarification from appropriate sources can help to smooth the way forward.

Source: The Washington Post, "Short sale of home owned by divorced couple creates legal complications", Ilyce Glink and Samuel J. Tamkin, May 15, 2017

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