Real Estate Realities in Divorce with Thomas D. Farrell

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Interview Transcription

ADRIENNE:
Welcome back and thanks for listening to the Team Lally Real Estate show home of the guaranteed sold program or will buy it. I’m Adrienne and I’m Attilio and if you have any questions just give us a call at 7999596 or check us out online at Teamlally.com

ATTILIO: 
Hey everybody just a big shout out to the that the music or what do we call it jingle? Yes, the Team Lally jingle jingle that was actually written originally composed and performed for us by Barry Mello Barry Manilow? No, we have our own Barry Manilow that was Howard Nett. So big shout out to Howard Nett for our Team Lally jingle. Okay, so

ADRIENNE: 
today’s guest is a certified specialist in family law. He arrived on the islands in 1959 at the age of three. From a family with a strong military background his father served as an Air Force JAG officer. They settled in Honolulu in 1971.

ATTILIO: 
He graduated from Punahou in 1974 earned his bachelor’s degree from the University of Hawaii in 1977, and later obtained his law degree of University of Santa Clara law school in 1980. Additionally, he holds a master’s degree from the US Army War College. Please welcome today’s guest, Thomas D. Farrell.

Welcome, Tom. Well, hi,

THOMAS: 
Adrienne. It’s How’s team Lally today?

ATTILIO: 
Doing great.

ADRIENNE: 
We’re doing awesome. And we’re super excited to have such an expert as yourself on the show to, you know, to share with our listeners about divorce and real estate. Yeah, I know you’re an expert at Well,

THOMAS: 
that’s a topic I’m sure everybody wants to know about divorce, right?

ATTILIO: 
Yeah, we’re all like, hey, let’s get around the Turkey today. And we’re gonna tell you about divorce. No. But when it does happen, I’m gonna tell you right now my first experience is you want a guy like, like, your side,

ADRIENNE: 
and he’s smart, and we’ll figure things out. Yeah, he knows that you guys are

THOMAS: 
all very kind. So what what would your listeners like to know that I could answer? Well, let’s

ATTILIO: 
hit it off the top. Because you know, we’re realtors, your family law attorney. And this is the if there was a Venn diagram for your profession, and in our profession, it would overlap in the middle, and that’s going to be the real estate. Tell the listeners, in your experience, what happens to a house during divorce, that’s been your experience? Well,

THOMAS: 
basically, there are two options. Of course, I’m assuming that the house is part of the marital estate, and it almost always is. But if there’s a prenup, for example, that has excluded that house from the marital estate, that’s another matter, it goes to the owner. But otherwise, basically, either one spouse buys out the other, or the place gets sold.

ADRIENNE:
And then what about like, if the they have kids? Are they able just to put it in the kid’s name, and then give it to the kids? Well,

THOMAS: 
you know, I’ve seen people do this. And a lot of my clients have told me that they want to do this. But frankly, I think that’s a terrible idea. Because the problem is that, well, first of all, you’re not going to be putting children who are under the age of 18, on title to a piece of real property. So you’re going to have to create some sort of a trust. But then as they get older, and they go on with their lives, who’s going to get the benefit of the house. Yeah. So for example, if you have an older child who is now married and on the mainland and pursuing some other career, they’re going to want to get their cash out of the place. Whereas if you have the other sibling, who’s living in the house, it’s a great deal doesn’t really have to pay much to keep the thing going, they’re not going to want to sell and so what you’re doing is you’re setting up your your children, to have a conflict with each other years into the future,

ATTILIO: 
unless you get a chainsaw and cut the thing up into a couple pieces, which never happens. And it’s and

THOMAS: 
I haven’t seen it yet. But I’ve heard of a couple of cases where lines get painted down the middle.

ATTILIO: 
Yeah, that was episode A Brady Bunch, when Marcia and what’s her name? They were like, This is my side of the room. And now the tape don’t go on my side of the room. But yeah, in reality, I think that’s great advice, because we’ve seen it from non divorce situations where it’s good left to the kids. And if we had $1 for everybody said, I want to buy my siblings out, I’d have $100 in my pocket, if I had $1 for every sibling that actually could do it. Zero. I’ve never seen a sibling, the other siblings happen.

THOMAS: 
Yeah. And what’s gonna happen in many of those cases is when they have that fight, and they can’t work it out, then somebody’s gonna wind up filing a partition action in the circuit courts, and now you’re gonna have siblings essentially suing each other and a forced sale under judicial supervision, which is not exactly the most efficient way to sell a house.

ATTILIO: 
No. And so how can they find out what their house is worth without spending $5,000 on an appraisal?

THOMAS: 
Well, I’ll tell you, there’s a number of things that you can do. Now, you know, the first thing you can do is just go online and see what the City and County of Honolulu says it’s worth. That’s publicly available information. But usually the tax assessed value is going to be a little low. Although late it’s been. It’s been running pretty close to market because you know, the city needs the money. Yeah. But the other things that you can do is you can take a look at some valuation websites like Zillow or Redfin, and they’ll give you an estimate. And then I think, in many cases, it’s not a bad idea to call somebody like, like you to do you have a friend in real estate, sure, you do only a phone call away, right? And that would be and you folks can provide, not an appraisal but are realtors out into value. And, you know, a lot of times, that’s really not any worse, or less accurate than a than a full blown appraisal, especially when you have communities that were all built at a particular time. There’s maybe a couple 100 houses in this development. There’s four or five different models. And so there’s and there’s a pool of sales, and so you can say okay, well you have the model, three house and Lakeview estates community. Five of them sold in the last six months, and this is what they all sold for.

ATTILIO: 
Yeah, the thing that I would tell our listeners is this, if we do a comparable market analysis, that’s what we call a CMA. And we came up with a price point. The the concern there for either party is that oh, well, you know, I know it’s worth more than that. And I want I want you know, if my 50% of a bigger pie is going to be more money, I want that. But the appraisal, the comparable market analysis is just going to be a range. And at the end of the day, what it’s going to sell for is what the market will bear. So unless you’re using the appraisal to make the decision on on somebody buying somebody else out cash, if he’s going to be if you’re going to be putting the home up for sale, what I’m saying is that it’s just give you an idea of what it’s worth, but what it’s going to sell for is what it sells for.

THOMAS: 
No, you’re absolutely right. And, you know, I don’t usually try to worry too much about what the value of the house is, you’ve agreed that we’re going to do a sale, the market is going to tell us what it’s worth. But in a buyout, that’s a different matter, the parties either have to agree on a value, or the court has to assign a value and sometimes we go to trial, and we’ll have the Battle of the appraisers. Which is not a not a good thing, nor terribly efficient. So

ADRIENNE: 
Tom, one of the things that I think that we’re experiencing, and seeing now is, you know, with their rates going up so much they were at an all time low in the in the twos. And then you know, couples Yeah, and a couple gets, you know, he’s getting divorce and other rates are in this, you know, I sixes, little sevens. And they don’t want to refinance to get the other party off of the mortgage. Like how is that treated? You remember?

ATTILIO:
Do you recommend like maybe they should rob a bank or something to come up with?

THOMAS: 
Well, I’m not ethically required not to advise people to break the law. But short of that, you know, I don’t know, is it against a lot of to get a printing press and somebody and

ATTILIO: 
they’re open 24 hours? But yeah,

THOMAS: 
well, you know, I hear this a lot. And the problem is that for the person who’s being bought out, if there’s no refinance, that loan is still sitting there on their credit report. So let’s say that now the spouse who has been bought out, wants to go get another place to live and applies for a mortgage, and he’s going to get turned down, because according to the credit report, he’s still on the hook to Bank of America for $500,000. So in most cases, there’s going to have to be a refinance. Now, sometimes the parties can agree that they’ll they’ll delay the refinance for some period of time, a year, a couple of years at the most, but in the hope that the rates are going to come down someday, but sooner or later that that has to happen.

ATTILIO: 
Yeah, one of the things that we came across from exact existing couples is that they think that the divorce decree, when you correct me if I’m wrong, that the divorce decree stating that all the obligation for that mortgage goes to the other party that does not divest you of the responsibility to the mortgage company, the divorce decree.

THOMAS: 
That is That is absolutely correct, the divorce court does not have the authority to change the underlying relationship between debtor and creditor, particularly when that creditor is not even a party to the divorce case. So yeah, that’s, that’s the other reason you’ve got to get the roof, the refinance refinance. You’re counting on your spouse to pay that mortgage, or your ex spouse to pay that mortgage. Your ex spouse doesn’t, hey, guess what? The bank’s coming after you even though she agreed in the divorce decree? You’re still liable to the bank? Yeah.

ADRIENNE: 
So on that note, being liable to the bank, you know, when you’re going through that process, how do you decide who gets to stay in the house and who’s doing who’s paying for the mortgage and house maintenance, so

ATTILIO: 
occupying, paying mortgage?

THOMAS:
Well, it’s like a lot of things in divorce, if the parties can come to an agreement. That’s fine. They, in fact, in many cases, they’re not even going to have to see a judge as long as they agree on how things are going to be handled. But a lot of times, they don’t agree, you know, one spouse wants the other to move out. They’re fighting over custody, the children and one spouse feels that if that spouse can stay in the house, they’re going to be advantaged because the court is unlikely to remove the kids from that house. And so if they can’t come to an agreement, they’re going to have to file a motion and go have a hearing in front of the family court judge and the judge is going to decide who gets to stay in the house. And who pays for it?

ATTILIO: 
You know, you give us an interesting question, and I don’t even know the answer. Why do I need to hire another attorney after I get the divorce done?

THOMAS: 
Well, it’s very simple. The divorce decrees don’t convey title for real estate. So if the divorce decree says the residence ID 1237 Washington Boulevard is awarded To the plaintiff. Yeah. Well, that’s all very nice. But until somebody actually has a deed recorded in the bureau conveyances or in Hawaii, we also have Land Court, which is an alternative registration system. Yeah. Then the legal and record owner of the property is still the two spouses. Gotcha. So there’s that extra step. And most divorce lawyers will tell you, Hey, I’m not a real estate conveyancer. So, my job is done when divorce decree has been entered. You know, here’s a couple of names of people who know how to do real estate conveyancing.

ADRIENNE: 
And we have a great one. His name is Jason Woo. And he’s on he’s on experts. We trust he does all of

ATTILIO:
he’s got a black belt in in quitclaim deeds,

ADRIENNE: 
and, and he helped me and I had to do this personally. So

ATTILIO:
Tom, interesting thing you mentioned, he says he comes across any reviews them because he’s doing the transfer, but you’ll notice like, good 60 70% of the deeds that are written out there have some errors in them, because this is one thing that he just focuses on. Right. And

THOMAS: 
you know, the other thing about making sure that there’s a deed done besides the legal title is also because you retain liability for that property as long as you’re a legal owner of it. Now, if you refinance, because you’re doing a buyout, obviously, the lender is going to take care of all of that for you. So when you go to closing on that refinance loan, there’s also going to be a deed that’s been prepared by the conveyancer that’s been chosen by the lender. Here’s

ATTILIO: 
the thing I’ll point out, we’ve seen this happen. People think because I got off title. I’m not obligated to the mortgage anymore. And that’s not true. And they find out when the party that stayed in the home stops making payments. I know this because we did a bunch of distressed sales back to the old 708. I used to come across that quite a bit.

THOMAS: 
Yeah, that’s, that’s not surprising. People seem to think that, because I’m not on title. I’m not off the mortgage. And that is not true until there’s been a refinance. Or, or the lender has released you from the mortgage.

ATTILIO:
Yeah. Alrighty. So while you’re saying something else,

THOMAS: 
after that, you’re gonna be on the hook. Yeah. Okay.

ATTILIO: 
We’ve decided to sell the house, but we can’t agree on the listing agent. What now?

THOMAS: 
Well, you know, I don’t really understand a lot of times why divorcing couples fight over who the listing agent is going to be? Because the listing agent doesn’t really favor one party or the other. The listing agent wants to sell that house for the highest possible price, which is a benefit to both of the parties, right? Yes, yes. So it’s like, well, that’s the one you picked. So that must be there on your side. Now, that’s not really how it works. But if you can’t agree, then somebody files a motion. Usually it’s after the divorce has been done, filed a post divorce motion in the family court. And typically, what the Family Court Judge will do is to say, Okay, let each side nominate up to three nominees. I want to see their their curriculum vitae, I want to see their marketing plan, and then I’ll pick one. And that’s what happens. Yeah,

ATTILIO: 
make it really easy for you folks, if you go to oahudivorce.com you can actually download. It’s a PDF right there. Adrienne, both Adrienne and I and you said a curriculum vitae. And that’s Latin. And I don’t know what exactly he means. But it’s like a resume that you all seem to use in the in the legal for profession? Or do you guys have it defined as something else? Yeah. Yeah, so ours are right there. And if you don’t like me go with Adrienne. And if you don’t like Adrienne, go with me. Easy.

ADRIENNE: 
And then, Tom. So I know that we’ve come across this quite a bit that, you know, the, the other party is very uncooperative and won’t sign the listing agreement. What can I do? What’s next? What can they do?

THOMAS: 
Well, you know, as, as the listing agent, or at least the prospective listing agent, I know you have considerable persuasive powers. But the most important thing to do is figure out well, what’s the real problem here? Why are you not wanting to sign the listing agreement? Do you have a problem with the list price? Do you have a problem with some other term there? But oftentimes, that’s not really what’s going on. It’s just that the former spouse is so one is just so angry about the divorce or otherwise, they’re uncooperative, that they’re just not going to sign anything. So there is a process that’s available. Again, you file a post divorce motion in the family court. And the Family Court Judge usually is going to enter an order that says, okay, uncooperative ex. I’ll give you 48 hours to sign the listing agreement. And if you don’t, then after that the clerk of the court is authorized to sign it in New York. Lace perfectly valid legal, and off you go and you get the sale done,

ATTILIO: 
I think, yeah, go ahead. Okay,

THOMAS:
you’re not quite out of the woods, because of course, you know, the uncooperative ex can also say, Well, I’m not going to accept an offer. And then you’re gonna have to go through the same procedure, getting the court to approve an order the acceptance of the offer. And so sometimes in these post of war sales, you’ve got to find buyers that are willing to wait a little while Yeah,

ATTILIO:
what I find too is that sometimes we get locked down into, it’s kind of like the Russia versus us mutually assured destruction. Having more missiles is not going to stop any of the other people just it just is just the logical outcome as will destroy the whole planet. But and then who wins there nobody. So mutually assured destruction is what we find people doing. Adrienne and I, we probably spent 6060 plus hours on a divorce real estate training with family law attorneys and judges. And what we found is that you just got to get in there and do exactly what you said, find out what’s going on, ask more questions, do a lot of conflict resolution. And the other technique that we’ve used or strategy is just being able to communicate in with neutrality. You know, so we come in, and that’s really important. Yeah. And, you know, I

THOMAS:
mentioned the judicial remedies. But obviously, there are other ways to solve these problems through alternative dispute resolution. Sometimes, you can get the parties into mediation with a professional mediator. And frankly, sometimes as a listing agent, you wind up being the mediator.

ATTILIO: 
Yes. I think what that does, too, is that when people get locked down into these illogical mindsets, they end up losing, not making as much money because it just creates a longer drawn out process. We know that people that waited and then the interest rates went up when they could have just been amiable to each other and just got her done. So

ADRIENNE: 
So, so Tom, and so we’ve gone through a little bit of the details having to do with the property ownership, let’s get into the details of like what your firm provides, you know, should you know a couple be going through?

ATTILIO: 
What is their first meeting look like?

THOMAS:
Well, actually, the first contact with the client is usually going to be by phone, somebody will call in and they’ll say, Hey, I’m thinking about getting divorced, or I’m in the middle of a divorce case, and I’m looking for an attorney, they’ll usually get a brief screening by one of my legal assistants, Ashley, or Joanne, and then the call gets passed to me. You know, assuming that I’m in the office and can take it, if I’m a court or someplace else, then you know, we get the contact information and call them back. So then I’ll talk to these folks a little bit more, and I’ll try to suss out the important facts of their case. What do you do for a living? What’s your husband do for a living? Do you have kids? How many what are their ages? Where do you live? Do you own a house or any other real estate? What about retirement accounts? How’s the debt situation? And and is there any hair on fire emergency that’s going on? Like, you know, he locked me out of the house, and he will let me see the kids. So those are some of the questions that I that I asked up front. And also go over. And it’s a free phone consultation, by the way, with no obligation. And so I’ll also go over with them what the legal issues appear to be in their case, tell them a little bit of procedure as appropriate to their case, and try to give them some idea of what their case may cost, which is really a very inaccurate art. And then if they decide to come in and hire me, then we set up that first meeting, at which I’m going to do a more extended version of the first and get more financial information, talk more in detail about the procedures get an agreement as to how we’re going to proceed in the case. Some cases, you know, the initial approach is going to be let’s try to keep a lid on everything. Let’s put together a settlement proposal. Let’s look at alternative dispute resolution such as mediation. If we can’t get to an immediate agreement, but others, for example, where there is some sort of pressing crisis, we’re just forced to go into litigation mode right from the beginning. Wow.

ATTILIO: 
The question I had for you and it’s I don’t mean to put you on the spot but it’s the temporary restraining the financial restraint, financial restraining order. Can you familiarize our listeners with that? Because I know that’s a new law on the books probably there was isn’t been around for a long time couple of years. But what does that mean regarding Yeah, divorce and the sale of the home or the sale of the home? Sure.

THOMAS:
So The automatic restraining order goes into effect with the filing of the divorce complaint, which is the document that starts the case in the court system. So right from the beginning, there is an automatic restraining order in effect, and it basically prohibits the sale or disposition of any assets without either a written agreement of the parties or an order from the court. So you can’t cash out your 401 K, you can’t sell your house. Now routine day to day financial transactions, like pay the rent or make the car payment, that’s fine, you could do that. But it really kind of locks things down. And I have had cases, by the way, I can think of one in particular, where the house was listed. It was a beautiful house down and diamond had it listed. It was being shown, complaint for divorce gets filed. And I had to send a copy of that automatic restraining order to the listing agent and say cease and desist. Yeah.

ATTILIO: 
Yes, the if the if the parties are in agreement, selling the home, and they both have saw mine and are educated on the process and sign the listing agreement, and present that to both of their attorneys. If there’s more than one. Is that enough of documentation to be able to proceed with that?

ADRIENNE: 
With the with the financial restraining order,

ATTILIO: 
are we Yeah, yep. With that in place, and they still proceed

THOMAS: 
with is, although, although when we have a case in the court system, I always feel a little better if we document it with a stipulation, which is just an agreement that has been approved by the Family Court Judge. Gotcha. And that gives both the listing agent as well as the escrow company, and, and even the the sellers agent, a little more confidence that this transaction is not going to come undone or be otherwise found to be improper by some judge at a later time. Let’s get the court’s approval. Now. It’s usually not very hard to do doesn’t even involve filing a motion or going out to coplay. Yeah,

ATTILIO: 
here’s one of the questions that a lot of agents miss. And we’ve gone through a ton of training, we’ve probably done I don’t know, 50 6070 of these is that when when and it’s unfortunate that people this is a reason why people are coming to us to sell a lot of not a lot of the times but it’s it’s a noticeable number, that they’re getting a divorce. And the first question we ask is Have you filed? Have you filed for divorce? But I guess the other advice would be but maybe you should, and go get a consultation with Tom. Yep. So that, you know, he can give you some advice on how to best proceed.

THOMAS: 
Yeah, well, sometimes what people decide to do is that they’re going to try to divide the marital estate before they actually get divorced. Yeah. That’s not always such a good idea. So hey, here’s what we ought to do. Honey, let’s sell the house. I’ll take half you take half and then we’ll get divorced. Yeah, well, what can happen is that one party takes the half of the proceeds of the sale, puts it in an account in their name, that’s fine. And pretty much maintains that account attacked, the other party takes the their share of the proceeds and dissipates it. Well, guess what? That that’s not going to help the situation because when we go to actually do a divorce, and a divorce complaint is filed. The court is looking at the marital estate as of today, not as of three or four months ago. Yeah.

ADRIENNE: 
And that’s, you know, that’s something to, you know, really think about advice from Tom, you could

ATTILIO: 
have one party keep all the money in the account. And it’s probably the reason they’re getting divorced because one was a little spendy. And one was more more thrifty. So thrifty party puts all their money and keeps it there, spend the party goes and buy shoes, and I’m talking about the man goes in buy shoes, and then it’s all gone. Then they gotta split the season. Gotta go split the split again, or be possibly, yeah, open to that. So I see. Yeah,

THOMAS:

because the court the rule on the division of the marital estate, which means whether it’s in your name, his name, or both of your names together, it’s all part of the marital estate. And the marital estate is divided as of the date of the divorce, which is either the conclusion of the divorce trial, or the date that an uncontested divorce document is submitted to the court. So that’s a really bad situation because the other side got to spend it all. And now, the one who was very frugal, it’s going to have to share half of what they thought was going to be their share.

ATTILIO: 
So they come back from the Bahamas and like, I still want half of your half slug. Know, pretty much. Yeah. So good way good reasons to sit down with you and get some advice before proceeding.

ADRIENNE: 
And before we’re coming to the end of the show, Tom, but I do want to point out to our listeners that you your family law attorney, however you do have some other expertises I want our listeners to know about which are, so let’s just quickly run through them before we run out of time.

THOMAS: 
Well, sure I do. I do other family court matters. I do paternity matters, which are people who have a child and we’re not married. There’s no property division issues, but there’s child custody and visitation and support. I do domestic violence restraining order cases. I handle occasionally Child Welfare Services cases, and all the other oddball stuff that’s in the family court adoptions and guardianships. And what have you put the bread and butter is basically paternity, divorce and temporary restraining orders. And then I have this weird sideline, maybe about 10% of my practice defending security clearances. So these are people who are either in the military or they’re contractors or their civil service personnel somehow affiliated with the National defense establishment, who are having their security clearance either denied or revoked because of some sort of misconduct or perceived security risk. And those are some pretty wild cases. And some some time when you have another couple of hours. I can tell you some horror stories about those. We’ll make that

ATTILIO: 
the next show. All right. Well,

ADRIENNE: 
thank you. Thank you, Tom, for being our guest and providing such value to our listeners. And you really want to advise if anyone is experiencing any of these issues that we’ve touched on today, please give Tom a call. Yeah, Tom, what would be the best line for them to reach out to you at?

THOMAS: 
Its 8085358468. 5358468?

ATTILIO: 
All right. Thank you.

ADRIENNE: 
Thank you. Thank

THOMAS: 
you very much for the opportunity to chat with you folks. Again, it’s been a while and I’m sure appreciate the invitation.

ADRIENNE: 
We appreciate you too. Tom have you back on.

THOMAS:
Happy Holidays tall.

ATTILIO: 
So Tom, we’ll have him on again. When he’s on as a fifth guest this six opportunity is the six guest appearances free. Now they’re always free.

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