I AM DIVORCED

Joys of Homeownership
by Eva Sachs CFP CDFA

Elise (not her real name) was happy when she ended up as the sole owner of the family home as a result of her divorce property settlement. But getting the family home in a settlement isn't always the best thing.

Located in a nice neighbourhood, the home was valued at more than half a million dollars. The property had increased 4 fold since she and her ex-husband purchased it some 18 years ago.

Elise needed a mortgage to secure the home, and the monthly payment was well within her budget (or so she thought). She wanted to keep the house to minimize the impact of the divorce on her two kids, avoiding changing schools and uprooting friendships. “There's no way I'd ever be able to find another home as nice as this one," she told me.

Less than one year after the divorce, things started falling apart. First, the furnace needed to be replaced — a $900 expense, which she charged to her VISA card. Then, a leaky roof needed to be replaced — $1,600, which also went on her credit card. That spring, the fence along one side of her property fell down after a big storm and upon examination, it was discovered that the main posts were rotting so guess what, a unplanned new fence went up while she was on vacation with the kids. (the fence and the vacation went on her line of credit ). She wondered what might come next.

Then, toward the end of summer, her washer failed. Because the warranty had expired a year earlier, it made more sense to buy a new, more energy efficient washer for $1200 than paying the $500 repair bill.

Her debt was piling up. Before she knew it, her credit card and line of credit debt had grown from zero to more than $21,000, all since the divorce. Small repairs and routine maintenance expenses never seem to stop (like hiring someone to do lawn and snow removal that her husband had done before)

I routinely call Elise to see how she’s doing and she voiced her concerns about the house which was approaching a point where more costly repairs might also become necessary. I told her she had to consider the possibility she might be best off selling this house and move to a newer home requiring less maintenance. I recommended she get a home inspection by a licensed home inspector while she considered her options. She knew she couldn't sell it and get what she wanted for it without first doing some of repairs.

I called two realtors to get independent market appraisals. I requested assessments both with and without the repairs. Both agents agreed the repairs were necessary and would generate a higher selling price that would more than cover her costs. Elise concentrated on the things that most potential buyers focus on (the roof, new paint job and new tiles in the bathroom). The realtor also took her around and showed here what newer homes were available in the neighbourhood. With information provided by the realtor re selling and buying options, I was able to provide Elise with a budget of future housing costs. I showed her how she could pay off all her debt, putting herself in a far more comfortable financial position going forward.

The repairs were completed quickly. The house sold a few weeks after listing it. She and her kids moved to a lovely new home in the same neighbourhood. Elise later told me that moving to a new home was actually a great relief as it represented the fresh start she needed to move beyond the divorce. Having the right numbers and information paid off for her. A Divorce Financial Professional can help you get the right numbers and information before you sign your settlement agreement which may lead to an even greater pay off for you.

A conversation with our panel of divorce professionals about supportive approaches to divorce

TORONTO
Sept. 24th 2009

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I'M FACING DIVORCE

Keeping Divorce Costs Down
by Eva Sachs CFP CDFA

I was recently at a lunch meeting with other divorce professionals and the topic of the costs of divorce came up. How did we, as divorce professionals, answer the question “What do you charge and how much will it cost ” that all clients ask. People facing divorce have preconceived ideas about costs based on a friend’s experience, hearsay and media reports. Most people believe their own situation is not a complicated one and should fit the “average cost range”. As experienced professionals, we know that few divorcing clients fit the “average model” and the “cheapest price" may not be that cheap in the long run. You only have one chance at a settlement which will affect you for the rest of your life. You want to be sure to get it right.

So, how do divorce costs pile up?

The choice you make in how you will arrive at a settlement agreement directly affects the cost.

A do-it-yourself scenario where you work everything out between yourselves may be very effective and least costly but may best work in situations where there are no children, few assets and fewer complications.

Mediation allows couples to come up with and come to agreement mainly on their own. Couples share the cost of the mediator who facilitates with the couple in reaching an agreement. Each spouse in turn may have their own lawyer providing independent legal advice as required.

A Collaborative Divorce involves clients each with their own lawyer and the possible involvement of other professionals such as family specialists and financial specialists all working together to reach an enduring settlement. In Collaborative Practice, each professional charges at their own rate and divorcing couples have control over how much involvement from each professional there may be, depending on their own unique needs.

Traditional litigation can be costly if negotiations fail and end up in court. Trial costs can be enormous.

Legal and professional fees represent only part of the costs. Other factors can impact the total cost of your divorce, such as:

• The nature and complexity of the couples’ situation itself.
• Your lack of financial knowledge or familiarity with your own finances.
• The need for involving other professionals to assist with valuations of such things as home, other properties, pensions, businesses, stock options, tracing assets.
• Your emotional state which may affect the duration and time involved in reaching a settlement
• Your decision to fire lawyers or lawyer’s decision to fire you.

The expertise of divorce financial planners is essential during divorce as they help :

• budget for this process
• source funds to pay for the divorce
• educate clients and professionals about complex financial issues
• analyze choices with greater expertise and less expensively than lawyers
• produce precise analysis for desired outcomes
• provide financial counseling to clients post divorce

You should embrace the opportunity to pay for the knowledge and expertise of professionals to have peace of mind post-divorce. A divorce financial planner is one expert you want and need during divorce to make strategic recommendations in a cost-efficient manner, no matter what method you choose to deal with your divorce. This is what you get when you pay for it!

Eva Sachs, CFP, CDFA
Phone 416.232.1540
Fax 647.436.3828
Email esachs@womenindivorce.ca
www.womenindivorce.ca