The Importance of Due Diligence When Acquiring Your Spouse's Share of the Marital Home

The Importance of Due Diligence When Acquiring Your Spouse's Share of the Marital Home

Three years ago, homeowners John and Jane faced a persistent issue—a leaking roof. Recognizing the significance of the problem, they filed a claim with their insurance company. The insurance company approved the claim and granted them $40,000 to fix and replace the damaged roof.

Unbeknownst to Jane, after receiving the insurance settlement, John decided to undertake the repair project with his close friend, Tom. Together, they completed the repairs at a cost of $5,000. With the surplus funds, John made the impulsive decision to purchase a new truck worth $35,000. Meanwhile, Jane believed that the necessary repairs had been done properly.

Unfortunately, the story took a turn for the worse. John and Jane ultimately decided to separate, leading to the transfer of the shared home's ownership to Jane. However, she was unaware of past improper repairs that had cast a shadow over the house. During Jane's absence on vacation, a second roof leak occurred, causing extensive damage to the ceiling, walls, furniture, and flooring.

Upon returning home, Jane immediately contacted her insurance company and filed a claim for the damages. Unfortunately, to her dismay, the insurance company rejected her claim after a brief investigation. The reason was clear: they had already paid for previous roof damages. Jane, completely unaware of the previous subpar repairs, now bore the burden of covering the costs for all the necessary repairs resulting from the second leak. This, coupled with the insurance denial, placed a severe financial strain on Jane.

The consequences of these events for Jane, who had acquired her spouse's share of the home, were financially devastating. Unfortunately, reopening the case during the divorce proceedings proved impossible, as divorce matters are typically considered final. However, this unfortunate outcome could have been avoided if Jane had taken extra precautions and approached the process of acquiring her spouse's ownership share of the marital home with due diligence.

When buying a home, especially when it involves acquiring your spouse's share of the marital home, don't neglect the importance of due diligence. Below are essential steps to consider:

1. Obtain a Property Title Report, a Property Profile, and Consult with Your Title Officer or Legal Counsel

Before finalizing the purchase, obtain a property title report and a property profile. Review these documents meticulously and consult with your title officer or legal counsel to ensure there are no hidden issues, such as liens or title disputes, that could jeopardize your ownership.

2. Obtain a Claim History Report (C.L.U.E.) from Your Insurance Company

Request a comprehensive claim history report (C.L.U.E.) from your insurance company. This report will reveal any past claims related to the property. Ensure that all necessary repairs resulting from these claims have been accurately and completely carried out by licensed contractors.

3. Conduct a Comprehensive Home Inspection

Approach the acquisition as if you are making a full home purchase. Arrange for a comprehensive home inspection, covering all aspects of the property. Ensure that the items noted in the insurance reports are thoroughly assessed and addressed by the inspector.

4. Share Information with the Property Appraiser

When determining the market value of the home, the property appraiser should have access to all relevant information, including details from insurance claims and the results of the home inspection.

5. Verify Your Insurance Coverage

Before completing the property transfer, contact your insurance company. Ensure that you are listed as the named insured and policyholder of the home. Failing to do so could leave you without adequate insurance coverage in case of an incident.

By following these steps and exercising due diligence, you can minimize potential risks and ensure a smoother acquisition process when acquiring your spouse's share of the marital home. Remember that thoroughness and caution are crucial to safeguarding your financial well-being and avoiding unexpected complications in the future.

About the Author
Dar Mardan, a seasoned realtor at Pacific Sotheby's International Realty, is your guide to all things real estate in sunny Orange County. With an emphasis on informed decisions and an array of knowledge spanning real estate, tax strategies, trusts, and more. Dar alongside his talented wife, Vida, offer a comprehensive, personalized approach to serve clients' real estate needs.
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