I usually write to family law attorneys in this blog. This post is to both attorneys and divorcing clients but written as if to the party who is divorcing and facing an upcoming mediation. It's really "5 Things For The Attorney [To Get Their Client To Do] To Prepare For Mediation."
Mediation is becoming more and more popular. On any given week, I will have several customers who are mediating. There are wonderful benefits and especially cost savings over a litigated case.
I am only going to address getting ready for mediation as it pertains to home financing – the awarding of a marital residence subject to the grantee refinancing its debt and, in most instances, financing a buyout to the grantor.
But, here’s the thing – when it comes to the house, so many mediations are ill-prepared and/or mis-prepared. For example, did you know that if financing is needed the appraisal you may have obtained is totally useless and should never be relied upon to determine a buyout amount? So, bringing it to mediation can be a waste of time not to mention harmful if you agree to a buyout based on its report of value.
But, the bigger picture issue is the time that might be wasted discussing financing options without a Divorce-Lending Specialist having done his/her work. Who in that room knows how to answer the question “can you qualify to refinance?” The worst thing possible is to answer the question affirmatively or negatively without actually knowing.
So, how do you know what you need to know? How can you be ready for mediation that yields the best results with the lowest investment of time? Well just read my handy prep manual below. Here are the five things you need to do:
Now, let’s take them one at a time.
Ask your lawyer these things and then, be prepared for questions you haven’t thought of. How will you answer that surprise question or respond to that surprise statement from the other side?
Always run your ideas by your lawyer…who might tell you to just be quiet and let her do the talking; in which case, you are to be quiet and let her do the talking.
It’s a mistake for either side to just up and order an appraisal. Such an appraisal doesn’t matter. See my blog [Appraisal Blog Post] on appraisal issues in divorce. For here and now, please realize this - The only appraisal that matters (when financing is required) is the one ordered by the lender through an AMC (Appraisal Management Company).
If it’s not feasible to obtain an appraisal in time for mediation (or if all you have is one that you obtained directly from an appraiser), make sure that you only agree to a buyout “subject to sufficient and satisfactory appraisal per the lender.”
What you just read in the previous paragraph – read it again. It’s SUPER CRITICAL.
So, how does one get a lender to order such an appraisal?
Easier said than done. Here’s the conversation when you call almost any mortgage company and you’re in the middle of a divorce:
You: Hi. You guys have my mortgage and I need to refinance.
Mortgage dude or dudette: Awesome (as he/she is dreaming about next month’s commission check). How much do you want to borrow? (as the calculation of next month’s commission check begins to take shape).
You: Well, the balance is about $XYZ but I need to “cash out” because I have to pay my soon-to-be ex for his/her equity in the house.
Mortgage dude or dudette: Oh wait, you’re divorcing??!!??? [shock, shock, dismay…depression] Call us after you get the divorce final, bring the decree and let’s see what we can do. [Click]
It’s almost as if it’s chiseled in stone mortgage law – thou shalt not apply for a mortgage loan until the divorce is final. Yet, for 15 years now, we have proved that, not only is there nothing problematic or illegal about applying for a mortgage loan before final divorce, it’s actually the ONLY way to make sure that you get the financing you need.
Slight problem: So, who is going to take your application? Well, I know a guy! (ME. 972-724-2881; email@example.com)
You see, it’s counterintuitive to the traditional model – you get a house picked out, then you get serious about your mortgage loan…it all takes place in about 45 days. With divorce, the idea is to get the mortgage loan processed, underwritten – EVEN WHILE DIVORCE TERMS ARE IN A STATE OF FLUX MAYBE – and ready to close so that no one wonders or guesses or hopes or, mostly, has to say “ooops.”
Just do it…now! Here. http://www.mimutual.info/grapevine/acookman/
This is the magic. And, it’s totally free. This is what can save hours…and money.
How much time is wasted with questions like “how can you afford this house?” and “can you qualify for a mortgage loan on your own” and “how much equity can you pay out?” It’s amazing that several people can discuss home affordability without the benefit on an actual mortgage loan process which measures such things at about a 97% rate of accuracy. (Even during the financial crisis following the meltdown of 2008, 89% of home loans did not default).
My Assessment/Approval statements get pretty detailed and specific. Yet they are usually no longer than 2 ½ pages. They typically state financing approval, conditions for financing and guidelines regarding support, buyouts, etc. Given several days we can even say things like “We have not merely pulled credit and taken our customer’s word for their income, etc., we have had the file processed, underwritten and it is now approved pending final divorce.”
With such a weapon in your arsenal, you can turn 2 hours of fruitless debate about whether or not she can “afford the house” into a 5 minute conversation – settled, upfront, affirmative and in writing.
I can give general advice on just about any call. And, I do that often – a general outline of how a buyout would have to work, etc. But, if I have at least a few days’ lead time, time to work on the potential transaction, I will have very specific answers and very specific recommendations. Of course, if you do #4, you might need to call me only to hear my calm, soothing voice reassuring you that everything is okay and you’re approved for financing.
Seriously, it’s a way to get free professional help for you and your client or attorney, on the spot, in real time.
There is no downside to having me help you prepare for mediation. It’s free (if I am doing your mortgage loan). It settles mortgage matters before they become insurmountable problems. It is proactive. It’s impressive.