Deeds not Words – Home Buying While Divorcing – Can My Lender Demand My Ex’s Signature?
Can My Lender Demand My Ex’s Signature? The answer: Maybe.
Imagine… You are just finishing up a divorce. Every property item is split, all the documents are signed, and you are just waiting for the court to bless your disunion. Your soon-to-be ex was entirely uncooperative and has stopped all communication. Good riddance, you think.
You find your next new home and purchase it by yourself; ready to start a new life. You pay tens of thousands of dollars in earnest money and watch the days tick by until the final closing. The new chapter of your life is about to begin….
Suddenly, you get an email from your lender or title company demanding your uncooperative soon-to-be ex sign a bunch of extra documents or else your closing will fail, and you will lose your new house – and your earnest money! You try to explain the divorce paperwork is all signed and you are practically divorced but they keep saying something about “homesteading,” as if it’s a magical secret concept that overrules all your divorce paperwork. They refuse to budge, your soon-to-be ex refuses to answer their phone… what next?
What happens next depends on how well-prepared your dissolution paperwork was – did your attorney (or you) require your soon-to-be ex to sign a quitclaim deed to that new property?
When two people are married and are buying or selling a house during the marriage, both spouses will need to sign the deed because Washington law requires everyone with rights in a property sign instruments that convey or encumbers it. This includes the “homestead” – your primary residence. Even if a divorce is pending and only one person is buying the house for their new, separate, primary residence, the soon-to-be-ex’s signature may still be required. But that can be fixed with a quitclaim deed!
A quitclaim deed is a document signed (granted) by the soon-to-be-ex that extinguishes all the grantor’s legal and equitable rights in a property. This includes homesteading rights! For related reasons, a Real Estate Tax Affidavit (REETA) should also be signed. Get your soon-to-be ex’s signature on those two documents early; as a condition of settlement if you must. Jointly signed legal documents stating when your marital community ended are great evidence that property is separately yours, but most lenders are uncomfortable interpreting the words in divorce pleadings – They are accustomed to deeds, not words.
If you are attempting to buy a house before your divorce is final, and your lender is demanding anything more than a quitclaim deed and REETA signed by your soon-to-be ex, tell them to review Snohomish Cty. v. Hawkins, 121 Wash. App. 505. In that case, a soon-to-be ex signed a quitclaim, which released ALL her property interests; including her homestead rights. Thus, the other person was entitled to convey or encumber the property without her signature. The court said, “Homestead laws are meant to protect one’s home from creditors; they do not protect a spouse who has conveyed her rights to another.”
Bottom line – get your soon-to-be ex to sign a quitclaim deed for all property you intend to keep (or buy or sell) separately. If your lender or title company wants more than that, you may need assistance explaining the law to them; especially if they start using the word “homestead.” Find a law firm that can has experience with this exact issue. When a lender is demanding your uncooperative spouse cooperate or else threatening to take away your house and earnest money, you want a team on your side. You want to be able to say, “call my lawyer.”