It’s a fact: breaking up is hard to do. But whether you and your spouse are going through an amicable or contentious divorce, it is extremely important to be careful when it comes to dividing your assets, particularly any and all real estate you own.
Texas is a Community Property State, which means that, unless otherwise specified in a prior agreement, all property and assets you acquired during the marriage are presumed to the property of both spouses (the “community”).
Transferring property during divorce proceedings is tricky. If one spouse is divested of his or her right to a piece of property, the other spouse needs to be sure they aren’t getting the raw end of the deal. Most homeowners going through a divorce still have a mortgage and may also have rent houses or other property with debt that both parties in the community are responsible for.
Selling, Refinancing, and Deeds of Trust
The one alternative to transferring the property is to sell the home and divide the proceeds. But for many couples, this is the least desirable outcome, since they may try to sell the home quickly and, in turn, be forced to accept a lower offer than they would like. Plus, divorce is difficult enough without the stress of selling a house and moving, especially for any children the couple has.
Ideally, however, one spouse will take ownership of and refinance the property, thereby removing the debt from the other spouse’s name. In order to transfer ownership, the transferring spouse must sign a Special Warranty Deed, which states that the other spouse is now the owner of the house. But that won’t remove the transferring spouse’s name from the mortgage: that will only happen if the receiving spouse refinances. But this generally doesn’t happen due to the fact that a single spouse, unless he or she is a high wage earner, usually won’t be able to qualify for a new mortgage on their own, especially given the new mortgage rules recently established by the Consumer Financial Protection Bureau.
If your spouse is not refinancing, it is imperative that you have a Deed of Trust to Secure Assumption properly drafted in order to protect you and your credit. This document essentially gives the transferring spouse the power of foreclosure in the event that the receiving spouse does not hold up his or her end of the bargain.
There are, of course, other problems that arise, such as what happens to the equity, the surplus escrow account, mineral rights and royalties associated with the property, and other issues that you and your divorce attorney may not be aware of. And real estate investors, in particular, must ensure that all facets of their business and entity structures are thoroughly evaluated during a divorce in order to protect themselves and their assets. That’s why it’s important to seek the counsel of an experienced real estate attorney instead of relying solely on a family law attorney.
Divorces obtained without the help of an attorney are called Pro-Se divorces. Pro-Se divorcées need to be extremely leery of forms and documents found online. There is no one-size-fits-all solution for a divorce and, unfortunately, online forms don’t come with an experienced real estate attorney to redraft them as necessary. In my experience, it is far more expensive to clean up a badly crafted real estate deal than to simply do it the right way from the beginning. Seeking the help of a real estate attorney now instead of later will save you money and undue stress in the long run.
Turn to the experts
If you’re going through a divorce, you’ve got enough to worry about. Whether you’re selling or transferring and refinancing your home, call the real estate attorneys at The Farah Law Firm today to ensure you and your assets are thoroughly protected.