During an economic downturn, some couples who’ve decided to split up postpone moving. Instead they opt for what’s known as a “domestic divorce.” They continue living under the same roof, waiting for their finances to improve before one or both can leave.
Given the rising real estate market, an increasing number of estranged partners are now moving out, often bent on buying property. But financial planners caution against making a hasty decision.
“It’s tough getting your bearings when going through a traumatic life event like divorce. Even if your divorce is amicable, it’s wise to go slowly when making a major money move,” said William J. Beecher, a veteran financial planner who’s been through divorce himself.
Leo Berard, a real estate broker and charter president of the National Association of Exclusive Buyer Agents, said it’s often prudent for a departing spouse to take a short-term rental before heading into a home purchase.
Still, he acknowledges that some resist this notion because of the hassle involved in renting first and moving later. If their finances and credit allow, such people would rather buy immediately.
Are you exiting a marriage and intend to buy a property? If so, these pointers could help:
•Look for objective advice to help shape your purchase plans.
Besides changing their housing situation, newly divorced couples are often rebuilding their entire lives.
Assuming they can afford it, he urges newly divorced homebuyers to spend a couple of hours reviewing their current budgetary picture with an accountant or financial planner who charges on an hourly basis. One way to find a fee-only planner near you is through the National Association of Personal Financial Advisors (www.napfa.org).
“Whenever you’re making a money decision, you have to keep your long-term financial goals in mind, such as sending your kids to college and saving for retirement,” said Beecher, a fee-only planner.
•Realize that mortgage lenders might let you borrow more than is wise.
Financial planners say it’s always smart for prospective homebuyers to gain mortgage pre-approval before shopping for properties. This helps ensure they won’t waste time looking at homes above their price range. Also, a pre-approval letter gives you more credibility with sellers when bargaining for a home.
But Lisa M. Andrews, a financial planner who’s helped a number of clients navigate divorce, notes that despite currently stringent lending standards, many people can still gain approval for a bigger mortgage than they can afford, given their expenses.
“Do an independent budget before you fall in love with a house,” said Andrews, a fee-only planner who heads her own firm. “Divorce can be expensive and the costs of your transition are a big unknown.”
•Don’t let a real estate agent pressure you into a premature purchase.
“There are a few agents out there who just want a quick sale. But if you’re going through a divorce, you need to find someone to work at your pace,” he said.
He contends it’s a smart strategy for newly separated or divorced people to begin working with an agent as soon as they’re sure they’ll be buying a home. At this early stage, the agent can help you get an overview of your market area.
Agents who enjoy working with buyers often gain special expertise in this segment of the real estate market. You can find such specialists through the Real Estate Buyer’s Agent Council (www.rebac.net), or by contacting the National Association of Exclusive Buyer Agents (www.naeba.org).
To contact Ellen James Martin, email her at email@example.com.