Jimmy Vaught

One of the biggest challenges I have is to come up with creative solutions to divide the marital residence.  The marital residence is so much more than just a piece of real estate.  Often, it represents the dream gone sour.  One spouse can't afford to stay in the house, but doesn't want the other spouse to live in the house.  You can't have it both ways.  If one spouse can afford the house, that is so much better than when neither spouse can afford the house.   

I am often asked if spouses have to wait until the marital residence is sold to finalize the divorce.  The answer is "no."

Spouses can continue to own the home jointly after the divorce.  When this happens in one of my cases I like to include language in the decree that the house will be listed with a licensed real estate agent within a specific time following the granting of the divorce.  I also include a methodology for agreeing on a realtor and for following the recommendations of the agent/broker regarding the beginning listing price for the house, the timing and amount of reduction of listing price for the house and the final sales price and terms of the sale of the house.

When repairs to the house are necessary in order to list the house, it is not unusual for one spouse to pay the expense of any repairs to the house recommended by the agent/broker to market the house and that spouse be reimbursed for the expenses from the net proceeds of the sale.  It is also common for one spouse to pay the mortgage payments and other utility expenses deemed necessary to market the house.

At the closing of the sale, the gross proceeds from the sale are divided in this order:  (1) the mortgage and any other liens must be paid first; (2) all real estate commissions and closing costs come out next; (3) the expense of any repairs to the property or mortgage and utility payments would be repaid to the spouse that "loaned" the money; and (4) the remaining funds would be divided between the former spouses as agreed in the divorce decree. 

As you can see, the choice of the realtor is a very important decision, because the realtor is going to offer their experience and knowledge to help you get the best price for the house in the shortest time frame possible.  This is not the time for you to use a "friend" who dabbles in real estate.  You need a strong professional who has a proven track record in your area.

Owelty Liens and Selling a House

by Kathleen Bucher

Kathleen Bucher

Often, when spouses contemplate divorce, one of the major assets of the marriage is their home.  In Texas, both spouses are almost always on the mortgage.  If the house is to be sold, then the mortgage will be paid upon the closing of the sale.  However, if one of the spouses wants to keep the home, and there are no other liquid assets to pay the other spouse for their portion of the equity, then the other spouse will need to have assurance that when the house sells or refinances, they will receive their money.   An Owelty lien is placed on the house in the deed records, and this serves to secure the debt and inform any potential buyers that money is owed to a previous spouse. 

Here are a couple of problems that Realtors sometimes find.

The spouse who received the house subject to the Owelty lien decides to refinance with another lender. The other lender approves the loan but the Title Company doesn't notice the Owelty Lien to the other spouse. The Owelty Lien should be paid off in the refinance as the Owelty lien laws mandate. However, this doesn't always happen. One of the ways this could occur is that the Owelty lien did not actually get filed in the county deed records.  The Title Company would not see the lien on their title search, so the lien would not be paid.  The spouse would then have to sue the former spouse to enforce the lien. It could take years of effort and substantial legal fees to gain the payoff that should have been made at the time of refinance.

The spouse that received the house subject to the Owelty lien decides to sell the home and doesn't tell the realtor about the Owelty lien. When the house receives an acceptable offer to purchase, the spouse enters into a Purchase Agreement with the buyers. The buyers apply and receive approval on their loan.  The title company finds the Owelty lien in preparing the loan for closing and comes back to the seller with the information about the Owelty lien. If there aren't sufficient funds that to cover the underlying loan and the Owelty lien, and the spouse can't cover the shortfall, the contract could be void, and the buyers might have grounds to sue the spouse.

If you were awarded an Owelty lien to secure your interest in a house be prepared to keep one eye on the home's sale or refinance activity.  You can do this by asking a Realtor to periodically monitor the activity through online listings.  Also, check the county deed records to be SURE that your Owelty lien is actually on file.