What would you recommend? Divorcing, unemployed, house not selling

Question

Hi all - newbie here... I have quite the pickle of a situation.  I was laid off from my employer at the end of 2023. Within a few weeks my spouse asked for a divorce. (not my favorite year obviously). Our primary asset is a house we bought in 2021 for $975 (3% interest rate). We have it listed for sale for$1.3, but it is just sitting due to interest rates. In an effort to bring ANY $ in to help cover the mortgage ($4600 including taxes and insurance), I put together an AirBnB site for the property and set it live, with zero expectation. Within just HOURS I had more than $6500 in attempted bookings. I quickly delisted as in that short time I had realized my town requires a license, but it sparked the possibility that this could be a great kickstart to my real estate dreams. There are even 2 gigantic "crawlspace" areas in the house that could be developed into additional ADUs.  My questions are many... but the main ones are a) how would an unemployed person like me extract my ex-'s share of equity to get them out of the property? b) I was initially thinking short-term rental, which is where that surge of requests came from but it feels like a lot of work as I would be doing the turns/cleaning for most part so what are the pros-cons of mid-term? c) how could I build out at least 1 ADU while I was renting out the rest of the house so I could have a place to stay? I imagine construction noise doesn't garner tons of points with guests.  Any creative ideas welcome thank you!!

Jonathan Greene · Answer

In theory, your ideas are pretty sound, but what you are proposing is not realistic. You can't be thinking of how to repurpose the house while going through a divorce and without a job. Your first thing to do is to find a job to bring money in on your side. Divorces are not usually amicable so trying to get another party to agree to make money on the house (and move you out) will be time consuming and very unlikely.

This statement though, "it is just sitting due to interest rates", is troubling. It's not sitting because of interest rates, it's sitting because it's overpriced. Rates and market conditions don't matter, if your house is not selling in a time when there is low inventory, you are overpriced. Reduce the price, make the sale, split the profits, and re-start your life.

Kay S. · Answer

hi all - just to close the loop on this. I appreciate all the input. In the end, the weekend after the fed announced the first interest rate drop, we had an open house that had more traffic than our opening weekend 3 months earlier. we received a full-price offer for the house and closed in early November. obviously I have no way of knowing if the interest rate drop was a trigger, but nothing else changed in the market at that time. just wanted to share in case others are curious. appreciate all the thought partnership!

Nathan Gesner · Answer

My basic philosophy is that if you can't handle the little things, then you can't handle the big things. You lost your job and are still jobless eight months later. I don't know how you can successfully run a short-term rental business with that mindset.

Chris Seveney · Answer

Few questions- to afford a $1M home you must have had good salary - who was the bread winner between you and your ex?

What is the current prospect of you finding another job?

While doing an Airbnb seems like a good idea it does not resolve the issue of the divorce and splitting the property

I still think your best bet is to drop the price and sell it and start your life over. Trying to manage a $1M Airbnb rental while it sounds good you got $6500 in bookings you still have significant costs to operate it with maintenance repairs, utilities etc.

Nathan Gesner · Answer

Well, I appreciate you taking the time to come back with an update. Congratulations on the sale. I hope 2025 turns around for you.

Jason Wray · Answer

You are in a very tough situation not because of the divorce or employment that all can be mended and repaired with time.  The problem is your equity position meaning if the home is worth $1.3M and you owe $975K you are sitting at a 75% LTV with only 25% equity.  A cash out refinance is maxed out at 80% LTV so 5% of $1.3M is $65K minus closing costs.

You would need to show income and have a W2 job to refinance but you might be able to take out a HELOC to pay off your Ex-Husband.  If you have a good attorney it would be smart to show your husband the actual math of the scenario.  You or both of you might think you have a $1.3M home but in reality its a $975K debt!  It would be wise of your husband to release the home to you to relieve himself of the debt.

You could then refinance the home into your name down the road and take out a HELOC as soon as you can show income. I would imagine the divorce decree does or will read that one of you must try and sell or refinance the home in your good faith best efforts.

Reason why it should be a walk away for one of you is most people when it comes to divorce only see the sale price or homes value.  You will not see $1.3M you will only clear the difference of that 25% ($325K) minus taxes, Seller/Buyer fee's, attorney fee's might leave you with $180k amount split 2 ways so $90K each.

You could take out a Heloc and pay him to walk away from the home so you can turn it into your home plus rental.  If not rates are falling so there should be some more buyers coming to the market very soon.  Sell the home take you share and buy an investment home using a DSCR loan you do not need income or a job with DSCR.

Chris Ayars · Answer

I agree with @Jonathan Greene. He said it well!

Ashish Acharya · Answer

You're in a tough spot right now, dealing with a divorce, unemployment, and a house that's not selling.

To move forward, you might consider refinancing or looking into a home equity loan to buy out your ex’s share—if possible.

If not, selling the house to an investor could be quicker to access some cash.

For income, STR saves taxes and gives you the cash flow you’re looking for.

JD Martin · Answer

Sell the house, clear the decks, get a job, start fresh. Your test ad doesn't mean this house is a great STR. It doesn't mean anything at all, actually, because it's a tiny sample.

You are trying to build on a very fluid and shaky foundation. That's a recipe for losing everything.

Kerry Baird · Answer

I am running short term rentals, which have been an amazing business for me and my kids.  My DH does have a great W-2 income.  There are seasonal dips in income here on the barrier island of E Florida.  I'd be in one heck of a situation if I had all of my units go vacant for a month or two, and expect to have that money to pay expenses...and no safety net.

However, what if you could take your side of the equity and find your feet.  Once you have steady employment, look for a place where STRs are allowed, with an in-law suite.  Is that a possibility?  Just a little bit of time down the road would give you so much more in terms of planning and research.

What would you recommend? Divorcing, unemployed, house not selling

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