Refinancing Home Prior to Settling All Property


#1

My wife has asked for a separation. As such I have notified her that I would like to keep our house and she has agreed. I began the process of refinancing the home. I’ve had a Free Trade Agreement drafted at the request of the bank. She knows she will also need to sign off on the deed of the home at the time of closing.

We have not yet entered into a formal property settlement agreement. However, we have agreed on most things 1) We’ll each keep our individual retirement accounts 2) We will each keep the vehicles currently in our possession (hers has a clear title. Mine has a loan which I will refinance).

What remains is what we will do with personal property. And, most important what the final sale price of the house will be. I had an appraisal performed as part of the refinance. However, I would expect that I can reduce that based on certain expenses. Things that would have been covered by marital funds associated with the sale of the house should we have remained married and sold the house such as 1) Realtor fees/commission, 2) Closing Costs, 3) Deferred maintenance expenses (we have things that need to be replaced or repaired that we have intentionally deferred for the moment), 4) Other expenses like inspection and appraisal fees. The market value appraisal would be reduced by these expenses (or to the extent we negotiate this) and that would become the “sale price”. That price less any outstanding loans would be the amount from which her half of the equity would come from. Correct?

Now, if I am correct, what can I do to create a binding “interim” agreement that explains the my intentions of refinancing (yet no agreed upon sales price), explains our understanding of retirement accounts, vehicles and that we will still separate personal property (my refinancing and taking ownership wouldn’t bar her from any of the homes contents)?

We won’t likely be able to complete our separation agreement in time for the closing and need some advice on what can be done on an interim basis. I’ve already extended the mortgage rate lock once and would like to avoid that expense again. She just needs assurance she is not giving up any of her other rights after the refinance and we still have a chance to negotiate the final sale price.


#2

You and your wife can execute a separation agreement that would distribute all property, including the details on how the house would be sold and the net proceeds divided. Since you believe it is not likely that a separation agreement could be entered prior to the time of the refinance closing, then you may want to consider entering into an interim separation agreement dealing with only the house.

In the interim separation agreement you can lay out all the terms of the distribution of the house (including a “sale price” or how a “sale price” would be calculated), her equity payout in the house (or how this would be calculated), and the distribution of the contents of the house (or reserving this issuing). An interim separation agreement looks like a “regular” separation agreement, except it only deals with a few issues and/or pieces of property instead of the entire marital estate. To be a binding contract, both parties must sign it and both signatures must be notarized.

As a guide, you can take a look at a sample separation agreement on our website that you may find helpful.


#3

Would all of the parts of the agreement still be in place with some of them indicated as “reserved” or some other indication showing these matters will be dealt with later? How is it noted as an interim agreement?


#4

For the issues that have not been settled prior to entering into an interim separation agreement, you can simply leave them out and indicate that the parties intend to enter into an agreement regarding a final distribution of the marital property at a later date.

Be sure not to include the waiver and release of your right to a court action for equitable distribution in the interim agreement (this is routinely included in a final separation agreement but not in an interim agreement in case the parties end up not being able to reach a final agreement).


#5

Thank you.