Help! My House is Under Water.

I recently heard a statistic that as many as 50% of the homes in Maricopa County are under water. The real estate boom a few years ago and the crash that followed has left many homeowners owing more on their mortgages than their homes are worth.What happens with these homes in the event of a divorce? In some cases, a couple is able to “short sell” the house and thereby unload the house as they are unwinding their marriage. Some couples simply walk away. In other cases, one spouse tries to stay in the house and ride it out. Occasionally the spouse who elects to stay in the home wishes to be awarded more of the marital assets than the other spouse to balance out the negative equity in the marital residence that spouse is keeping.In my experience, however, judges are not inclined to award one party a greater share of the assets to offset the negative house equity. This is likely because, with a primary residence property, the first mortgage is almost always non-recourse. In other words, if the payments aren’t made, the lender can take the house by foreclosure or trustee’s sale, but the lender usually cannot pursue any deficiency (the amount of the first mortgage not covered by the proceeds of the foreclosure or trustee’s sale). Judges often view even the “under water” house as a neutral factor–not an asset with positive value but also not a debt with a negative value. It simply does not affect the division of the other assets and debts.