So it’s break up time and you can’t wait to “move on” in not just the emotional but the physical sense of the word. Even though you and your spouse can’t agree on much of anything, you both agree that it is time to sell your burdensome house and find more comfortable digs of less grandeur. This should be easy, right? Just ring up the realtor and make the appointment to sign the listing agreement.
Before you sign that agreement, especially if you are the financially disadvantaged spouse (i.e., you make far less or control far less) GET SOMEONE TO FIND OUT WHAT YOU OWE. There are many exceptions to the rule, but the rule is that you can’t sell a house until you can pay off the mortgages associated with it. Oh, you can agree to sell your house for whatever the price but to actually “close” on the transaction and convey title to the willing buyers you will need to pay off the mortgages and any other liens (e.g., tax liens, judgments etc) that may have arisen while you owned the place.
To some this would seem academic but in the rush to buy every piece of real estate in America between 2000 and 2008, the consuming public signed lots of funky mortgage paper including home equity lines of credit that nestled on top of conventional mortgages. People also refinanced their real estate many times to cover many expenses unrelated to home acquisition and ownership. They paid auto loans, college tuitions and consumer debt. When they come in to meet us, they often can’t recall whether or not the loan was a mortgage, what else might have secured their debt or even what the money was used for.
Most experienced realtors actually try to do a quick lien search before taking a listing to make certain the proceeds will be sufficient to pay their commission and otherwise “clear title”. But you must either ask the realtor or ask a lawyer to make certain that you know what debt you owe for which your house is collateral. This is not something to wait for. First you may find that while the house will close and the debt can be paid, you will have nothing left to put down on a new house. Second, if your willing buyer agrees to pay your price and then invests time, effort and money into getting ready to move in only to find out that you really can’t clear the title hurdle, that buyer may be looking for a lawyer to sue you for listing and selling a property you should have known you could not successfully sell.
There are ways to negotiate around some of these problems but no transaction where debt exceeds contract price is a safe transaction. The key however is to find out first what debt really is recorded against the property and then list for sale.