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Could short sale create a property division issue post-divorce?

For most Massachusetts couples who do not share children, the end of their marriage marks the end of the need to maintain ongoing communications. In some cases, however, there are property division  issues that arise long after an agreement has been reached and signed off on. An example is found in a couple who were unable to agree on how to handle an incentive payment brought about by the short sale of their family home.

The dispute centered on the fact that the husband had negotiated the right to remain living in the family home. He also took on all of the responsibility for making payments on the property. However, since both spouses had signed the initial mortgage, the ex-wife's name remained listed on the loan.

After a period of time, the man was unable to keep the home, and negotiated a short sale with the lender, under which the lender would allow the home to be sold for less than what was owed on the property. As an incentive to the seller to leave the home in good condition, the lender offered a relocation payment of $10,000. When the wife found out about that payment, she asserted that she was entitled to half.

In this case, the resolution of the dispute would likely depend on the language in the divorce settlement. If the man did indeed take on all responsibility for the payments, and the wife retained no ownership interest in the property, then it would be unlikely that she would have any claim to the incentive offered by the lender. A similar argument would apply to any profit that the man might make off of the sale of the home after the divorce. Unless the woman was owed money from other property division issues, she would likely have no recourse in the matter. For spouses in Massachusetts who are concerned about their own post-divorce issues, the importance of having clear terms laid out in the paperwork cannot be overstated.

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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