On the Wisdom of Purchasing Property During a Divorce

Buying property is generally a fairly stressful prospect even when everything goes as well as can be expected. Buying property while you’re in the middle of a divorce is kind of like deciding, while your plane is spiraling out of control toward the treeline, that it’s the right time to tell your boyfriend that it’s not his baby. Sure, you need to have that conversation at some point, but is this really the best time?

Of course, sometimes, it’s unavoidable. And if it does have to happen, you need to be prepared for the results. There are effectively two kinds of ‘during a divorce:’ the kind that happens when you’re actually going to court deciding issues like child support and division of property, and the kind that happens when you’re already legally separated but not actively pursuing a completed divorce judgment. Let’s talk about the last one first.

Purchasing Property while Legally Separated

The first thing you’ll find if purchasing property while legally separated is that very few lenders even recognize the status of ‘separated’. They’ll run your paperwork exactly as though you were married, which can be a good thing or a bad thing depending on your precise situation.

Fortunately, Michigan isn’t a community property state, which means that if you apply for a mortgage and your separated spouse doesn’t involve themselves in the process, the mortgage is entirely yours and the house is, too. If they do sign on the mortgage, the debt incurred and the home purchased will both be considered marital property.

The same thing applies to property purchased outright — if you make the purchase 100% out of your own separate funds, it’s your property. Add even a single dollar from a commingled (marital) account, and the entire home becomes marital property.

Before Divorce is Finalized

On the other hand, if you a divorce that is currently ‘in the works,’ you are allowed to present yourself to a lender/seller as a divorced person. However, you are also under legal obligation to tell your soon-to-be-ex (and associated lawyers, and the judge) that you are making a significant purchase. If they deem that the purchase is going to adversely affect the divorce process, they may ask for a stay — a legal document that keeps the transaction ‘on hold’ until the divorce is complete.

The Big “But!”

The one hitch to all of this is that if the court determines that you somehow spent marital funds on the property purchase, they can (and will, and should!) split up that property as marital property during the division assets. So if you intend to make any significant purchase while legally separated or in the process of a divorce, getting a skilled lawyer on your side should be considered mandatory. Speaking of which, our phone number is 248-723-5190 — we’d love to hear from you!