In the past, the equity in the marital home was often the parties’ most significant asset. The equity in the marital home was used to offset value in other assets for purposes of asset division. In the current real estate market, however, given the drastic reduction in property values and the frequent inability to sell at any “reasonable” price, the marital home (or any other real estate subject to equitable distribution) may instead become a liability, not an asset. Instead of wanting to keep the asset, the parties may be fighting over who is responsible to financially maintain that property.
This problem occurs most often when the value of the property is diminished by market factors to a value that is less than its encumbrances (such as first and second mortgages, home equity lines of credit).
Practically unheard of just a mere year and a half ago, this has unfortunately become an issue for many in the current economic climate. Ironically, the debated issue has now changed to figuring out which party may be forced to shoulder the financial burden of the former marital home. But the payments on the mortgage and lines of credit may be beyond the carrying ability of either spouse alone. As such, it is important for litigants to consider other options. While the most appropriate solution is highly dependent on your personal financial situation, solutions such as taking a loss and walking away (doing a “short sale”) should be carefully considered in the settlement calculus.