Ready for a Divorce? Your House Isn't

April 23, 2008— -- David and Tipheny DelPrado divorced in 2006. But the legal battle between the two didn't begin to wind down until this month, and the housing slump may be partly to blame.

Under their 2005 separation agreement, Tipheny DelPrado was supposed to assume the mortgage on the couple's three-bedroom Virginia home. For her, that meant either refinancing the mortgage or selling the house.

Tipheny DelPrado argued that the poor housing market was keeping her from making a sale, but that didn't stop a judge from threatening to put her in jail on a charge of contempt of court, said J.B. Thomas, the lawyer for David DelPrado.

The couple reached an agreement earlier this month that kept Tipheny DelPrado out of jail: If she fails to sell or refinance the home by mid-July, she'll have to give it to her ex-husband.

Tipheny DelPrado did not respond to requests for an interview.

"If she really wanted to sell the house, she would have to do anything it took to sell it," Thomas said. "She might not get the price she wants, she may not even get near the price she wanted had she sold it two or three years ago."

The DelPrados may represent an extreme case, but they're far from the only divorcing couple coping with housing woes. Divorce lawyers and real estate agents say that more and more of their clients have found their divorces snarled by the struggles they face in selling their homes.

Last month, median house prices saw their largest annual decline in nearly a decade, while sales for single-family homes nationwide dropped 2 percent, according to the National Association of Realtors. As shrinking home values, slow home sales and the credit crunch take their toll on American homeowners, splitting couples seeking to sell property might find themselves in a tougher spot than most.

"It's always complicated when people own a house, live in a house together and they need to get a divorce," said Lee Borden, a divorce lawyer in Birmingham, Ala. "It's getting more complicated now because they both know going into … a divorce that it's going to be harder to sell the house, in many cases it's going to sell more slowly."

Glenn Kelman, the chief executive of the realty Web site Redfin.com, said he knew of one couple who, while waiting for their home to sell, started to talk about reconciling.

"The housing market has just made it harder for people to make quickfire decisions and say 'I want out' and then get out," Kelman said.

"While their house sits on the market, maybe in that time there'll be a few people who remember why they loved their spouse so much in the first place," he said.

For Sale, Please!

But such happy endings are rare, and even couples who split amicably can find that selling their homes turns into a nightmare.

"It's an enormous financial drain, and even for people who have a lot of goodwill between them, it's probably taking a toll on their health as well as their finances," said Sharon Sooho, a Massachusetts lawyer and a co-founder of DivorceNet.com.

Sooho said that couples, for instance, may disagree on how to price their homes.

"They're under great pressure to make a sale," she said. "But the market is slow and if they keep reducing the price, sometimes the sale price may go below the [level of] the outstanding loan."

When a home's final sale price isn't enough to cover its owners' home loans, divorcing couples must decide how to split the remaining liability. Negotiating how to settle the debt can lengthen divorce proceedings, Borden said.

One spouse, he said, may not trust the other to pay his or her fair share and may demand other assets, such as a car or an investment account as collateral.

"You're saying, if I'm going to be stuck paying this, I want some assets that I can use to defray that cost," Borden said.

And then there are the homes that just don't sell.

New York lawyer Raoul Lionel Felder said he knows of couples who "live in holy deadlock," delaying their divorces and living together unhappily in hopes of selling their homes later and using the proceeds to fund their newly separate lives.

"They just keep going until the market changes," he said.

Getting Closure

While market factors can't be helped, divorcing homeowners can take measures to improve the chances of a successful home sale.

One key step, Anchorage, Alaska, real estate broker Niel Thomas said, is making sure that personal problems don't burden the selling process.

"My role has more to do with marketing the property than it does with being your marriage therapist," he said.

Choosing a real estate agent together is also important, Thomas said. If one spouse chooses the agent, he said, the other may become distrustful.

"I want them both to feel that I'm going to treat them both with equal respect," he said.

Kelman, the Redfin.com chief, said that once the home is on the market, it is in the homeowners' best interests to keep the reason for the sale -- their divorce -- under wraps.

Knowing that a seller is divorcing may lead some to make lower offers.

"People just take any sign of urgency as a sign that they can offer a lower price," he said. "So if you know that two people are going at it every night and can't wait to get as far away from each other as possible, you're probably going to factor that into the price you offer them on the house and hope that they just take it."

Borden disagrees.

He said buyers are more likely to recognize a great deal on a home if they understand why it's being sold in the first place.

"If you can say, the husband lost his job, the wife cannot get up and down steps anymore because she's an invalid now or we're going through a divorce and we can't afford to stay in the house anymore, I think it makes it easier for a buyer to grasp that narrative and say, 'Ah, now I understand why, even though the house is valuable, these sellers want to get rid of it,'" he said.

Buyers, he said, will put in low offers no matter what.

"This is a buyer's market. Buyers already know they can lowball you," he said. "You're not going to give them any additional ammunition."