The Three Wisemen of Divorce: Money, Psych & Law

Divorce and Real Estate

September 07, 2021 Shawn Weber, CLS-F, Mark C. Hill, CFP®, CDFA® and Scott Weiner, Ph.D., J.D. Season 2 Episode 10
The Three Wisemen of Divorce: Money, Psych & Law
Divorce and Real Estate
Show Notes Transcript

The Three Wisemen of Divorce discuss the strange COVID influenced real estate market and how it impacts the decisions people in their divorce.  Wisemen, financial divorce advisor Mark Hill, CFP, CDFA, psychologist Scott Weiner, J.D., Ph.D. and attorney Shawn Weber, CLS-F chat with realtor and Weber Dispute Resolution mediator Robert Flynn, J.D., SRES.  For more information about Robert Flynn's real estate business, visit https://fairwayresidential.com/agents/robert-flynn/.  To inquire about his mediation practice work with Weber Dispute Resolution, visit https://weberdisputeresolution.com/our-mediators/.

Unknown:

Easiest Way is Robert H. Flynn. H is for Henry not one way the other you know saying anything about Henry's a name when I was a little guy didn't didn't like it that much, but Robert H Flynn at fairwayresidential.com. You know my dad, my dad was Arthur H. Weber. And it was Henry Henry. He didn't like it either. Yeah, I don't know what but I'd love to see one of my grandkids named Harry. So

Mark Hill:

my father's name was Albert. And he hated it because he was called Bertie as a little boy, that was the shortening in England. No, oh, yeah. And so he went by James or Jim his middle name his entire life.

Shawn Weber:

Welcome to the Three Wise Men of divorce, money, psych, and law podcast. Sit down with the California divorce experts, financial divorce consultant, Mark Hill, psychologist Scott Weiner, and attorney Sean Weber for a frank and casual conversation about divorce, separation, co parenting, and the difficult decisions, real people like you face during these tough times. We know that if you are looking at divorce or separation, it can be scary and overwhelming. With combined experience of over 70 years in divorce and conflict management. We are here for you and look forward to helping by sharing our unique ideas, thoughts and perspectives on divorce, separation and co parenting. Okay, so it's been a weird real estate market, hasn't it? Mark?

Mark Hill:

bizarre. I've never had so many people soliciting too many agents telling me they have buyers from my house.

Shawn Weber:

Yeah, I

Mark Hill:

got one guy that calls me all the time says, I know we've spoken before. And my risk. He leaves that message every time. And it's like, I know we haven't stopped it. But yeah. Everyone's that. They're looking for inventory. There's no inventory. So

Shawn Weber:

we have a guest this week on our podcast, a good friend of mine, and also a member of the Weber Dispute esolution mediation panel, Bob lynn. And we're just glad to ave Bob on the on the on the oom today and so that we can alk about the real estate arket. Bob, you're an nteresting. You're an nteresting character. You got uite a background. You're you re an attorney in assachusetts.

Robert Flynn:

I was an interesting character. Before I moved out here, yeah. practice law for many years in Boston did a lot of real estate trial work. Yeah. I moved here real only because one of my five kids said, Hey, come on out here, dad and help me build a real estate business. And it struck me, right, but I've also been a mediator or arbitrator, and I do that kind of work and bring those things to real estate.

Shawn Weber:

Yeah. So if you haven't, you know, people out there if you got a dispute that involves real estate or probate, or any kind of civil question. Bob's a great mediator for that kind of stuff, and can really help you resolve your dispute. But, you know, I wanted to talk to you, Bob today, because we just want to talk about this weird market that we're in and you've got some serious background in real estate. And I just, you know, we're trying to figure out how this, you know, affects our our divorce clients that we're working with, and the folks out there that listen to this or divorce people and you know what, what is going on in this market, it's, it's seems to be a little different than what I'm used to.

Robert Flynn:

Well, the part of it that everybody seems really weird is that prices are going up, up up, up, up, seemingly without end, but that will begin to taper off. And we'll have to, and there are probably two structural reasons for that least as ICU, one people may not really see it unless you're on the edge of the business. But the inventory has shrunk, though. Nothing is different ways of looking at it. But two years ago in April 2019, there were 13,000 plus properties in the month of April 2019. For Sale actively for sale. Last year, the same month, there were 6600 plus properties in this year get down to 3000 plus properties just constantly getting capped. So with that shortage of property and increasing buyer demand and low interest rates, that's one of the two big reasons. The other big reason we were talking about it early today and another meeting since the last recession, housing starts Sit down 40%. So now you have an increasing population, people not putting their homes on the market. And there's a dearth of no inventory from stemming from the last recession 40% down from what it normally would be. So there we are, it's a fast market, put it on, you're gonna sell it.

Shawn Weber:

Yeah, I mean, Mark, you heard of a kind of some crazy things with people purchasing, haven't you? Yeah,

Mark Hill:

you know, the, there was a situation we had with somebody, a client who is getting a divorce trying to purchase a property. And so he makes an offer. And he makes an offer above asking price, and the people they're wanting to rent back. So he offered him a free 30 day rent back. He didn't get it because the buyer that did get it offered a free four month rent back. So they're not even getting kept possession of the house, they're gonna buy and they're not gonna get any income from it, they're gonna have to pay for it for four months. But just to get it, they did that.

Robert Flynn:

And I had a buyer lose out on several properties with 10 of the bids, even though they were really right around the top, they finally bought a beautiful home and a very happy, and I had one divorce sale not long ago, where because of intransigence on the part of one of the two spouses. They wouldn't say yes or no to any offer. And the office kept coming in 33 office later, the court was close to intervening, I would imagine, pull the trigger on that. And that was embarrassing. 33 office,

Shawn Weber:

well, and then go ahead, Mark.

Mark Hill:

But I remember a case I can't remember who the attorney was that the woman would not let who is living in the house husband and moved out long ago, she was a hoarder. And the place was just filled, he could hardly get in the door. And she wouldn't allow anybody into the property to show it. And she would just feigned sickness whenever the time came for someone to come and inspect the property. And it went on for literally for years before the court did intervene.

Robert Flynn:

Yeah. There's a real problem, you know, they're throwing your money away. Yeah.

Mark Hill:

What's going on in commercial real estate? Bob is the same sort of situation, I would imagine it might be sort of mirror image if people are not going to be looking for office space.

Robert Flynn:

Well, I know the apartment side that start there. It's kind of paralleling, what's going on here. Prices of going up. Sure, you know, the returns in San Diego, quite low, but it's quite safe. And prices are going up there and the commercial side on the office space, much less familiar with it, but I see a lot of vacancy signs, you know, in downtown La Jolla, right downtown La Jolla. So I presumed from scuttlebutt with other realtors, you're going to see price drops big time, changes now, law firms practice and things of that nature. So it's kind of a different direction.

Mark Hill:

But Weber is gonna move in into a closet at the side of my office space here say cut his commute down a bit.

Shawn Weber:

I'll cover my commute down by 10 minutes right? Well if I could get on the opposite side of that Qualcomm traffic thereby were you Yeah, have your office out that would be nice actually. But I like that.

Mark Hill:

Yeah, I like I'm in Sorrento Valley Oh no. Right off Mira Mesa Boulevard on Carroll Canyon Road if you know what that is. Do Yeah. And it's uh you know, I was on high blood for years paying four bucks and I'll come even come in a reality in Del Mar. Paying four bucks four and a quarter square foot and then when I opened the space for this business, it was like a buck 95 I couldn't believe it nicely improved. You know, it's a B it's a nice B building. It's a nice B build. You've been there. Shawn? It's got a nice landscaping free parking you know. So yeah, very comfortable where we are.

Shawn Weber:

Well, we you know, we're we're finding that no, I'm sorry, Baba. Keep talking.

Robert Flynn:

No, no, no, no, no, no, I'm sorry. I didn't mean to interrupt you. But you know, when we talked about demand and just talked about how sale prices, you know, they seem to be going up and all that. It's a couple of factors just so it's in the back of your mind. Going back three years. 573,000 was the median sale price of all kinds of residential property. 573 last year, April 600,000 sale price. This year 710. Wow, that was now I know from my reading about Boston constantly, it's replicated right there in Boston, in a lesser way through most of

Mark Hill:

the country, but it's certainly that way in LA where my son has just bought and will soon be selling another house.

Robert Flynn:

So yeah. And they're selling quick report that we have under a month's supply of inventory. And you should have six months supply of inventory. That means the sell off in a

Mark Hill:

month, well, when my son bought the house, the place have been on the market for eight hours when they put their offering. Yes, and they had great full backups when they accepted it The following morning.

Robert Flynn:

Yeah, so maybe there'll be a slight dip, but I, I, it has to slow me down. But I don't think we've seen prices dropping.

Mark Hill:

I think the biggest risk is interest rates. Right? I think that's, you know, the the long end, the Fed truly doesn't control, although they have done by purchasing the long end. But the reality is that if inflation does pick up, and it looks like it is significant, and we start to see it in wage inflation, I think bondholders are going to demand a lot more on the long end, and the 10 year could easily go back up into the 4% range. And that would change the mortgage market and affordability would get impacted. So,

Robert Flynn:

right? Absolutely. Yeah, it's crazy business.

Shawn Weber:

So okay, so mark, you and I've had this, we're where we got this couple, and they're, they're trying to figure out what to do with the house, and they got an appraisal, and the appraisal says X dollars. But the house across the street just sold for y dollars, you know, a lot more money and maybe they get a rent back and you know, all these crazy stuff we were talking about.

Mark Hill:

And when the out spouse goes shopping, she or he cannot find anything that's comparable for what the appraisal came in.

Shawn Weber:

Yeah, so the appraisal said, you know, you know, let's just pick numbers, round numbers, appraisal said 800. And they think they can get 900 for it. If they were to put it on the market. And if she were to go buy something, or he were to go buy something comparable, they'd spend 900, as opposed to 800. And so then what do they do? It's just a challenge. Right? So I mean, sometimes I've sent people to you, Bob, before who wanted to know what you would sell it for, which is is that? How is that different from just getting an appraisal.

Robert Flynn:

So this is really, I have used the praises as a as witnesses in court on a number of occasions, right? It's not because I sell property, but I claim I really have taken to heart the real estate industries worldview, which is that they're on the cutting edge of what a property really is worth. And in a market like this, where the prices are going up, up up, I think that may be true, the appraiser seems to have a little bit more backwards look in time. I and I think so I look at list price, for example, is kind of a target, it's a tool to get people in the door. And the sale pregnant. I used to say as a lawyer, nothing says I'm sorry, quite like money. And in the real estate world, it's kind of nothing sets the suggest what the real value is quite like a signed contract. So if you have a site, I think the good CMA by quality real estate person should really give you a really good idea of what the property can sell for. And the proof is in the pudding. If you look at the statistics, I won't get that. It's right around 100% of list price is what the property sell at, except this year. It's going over so it's an even then it's only like 1.9 100.9% of the list price. So that's kind of my take on appraisers have their place. But it's more in settling disputes, I think,

Shawn Weber:

well, and you know, we use them a lot in family court, you know, and figure out what the value of the house is you have usually have two appraisers, sometimes three appraiser testifying, and they could be wildly different.

Mark Hill:

And it's an immediately polarizing event if one is staying and one is getting bought out. Right? Because there are interests that have always coincided in this property that they bought together, they decorated together they did the yard together. Now one of them's Keep in it. And so they want the lowest price possible to buy the other one out and the one that's selling what's the highest price possible, and also probably has some emotional attachment to it. You know, it's where the children were born, or I've got that case right now, where the son was born in this house, and

Robert Flynn:

often see people keeping, selling the house versus keeping

Mark Hill:

you said, I go ahead, Shawn, tell me

Shawn Weber:

what to say lately. It seems like I'm seeing more people buying out. But

Mark Hill:

well, there's more equity in the properties to enable it to occur, number one. Number two, the interest rates are so low that people can actually, you know, get refight, should they need extra capital, sometimes just based upon income, or upon support will be paid? So I think those are contributing factors to it.

Shawn Weber:

But you know, we've been finding also, that's not necessarily the best choice for them to do a buyout. You know, we mark you and I had somebody recently where we're just like we were talking about, well, what if you didn't have this house? What if you were, you know, how could that maybe be better for you? Yeah.

Mark Hill:

And what if you decided to rent for a year and not feel this pressure, that also is another, the other side of the same coin in this market, which is, Oh, my God, I'm going to be out of the market. I won't own a house, if I rent for a year or two, where as to when I decide what I want to do with my life. And the problem with that is that they feel pressured into buying in a crazy market where there's no inventory, as Bob pointed out,

Robert Flynn:

if you keep the property, don't you lose, Mark, After a couple of years, you're the other way, maybe immediately the other 250 of the 500,000?

Mark Hill:

Yes, you can we can we can work around that to some degree, Bob, we can put something you know, if you've got kids, yes, you know, that we put pursuant to the divorce, the property will be sold at a future child related event like turning 18 or graduating high school. And we put that in the agreements. And that is works as far as I know, you know, in terms of how the IRS extended the period of that any two out of the last five years rule. But often, what happens is people you know, they, they can afford to do it now, because of those factors, you know, that they can, it's possible, but remember shown right after Oh, eight and oh, nine, nobody could afford it. And that's why housing prices were dropping, too. You know, there was just no one could afford to refi. Yeah,

Shawn Weber:

yeah, yeah, that was happening. And people were underwater all the time. And yeah, the houses were being sold.

Mark Hill:

The loan, the banks weren't out there, there was no money to being like, yeah,

Shawn Weber:

it was lending. Yeah. There is a lot in there a lot more loose with their money than they were before. Well,

Mark Hill:

there's a lot of money been created by I mean, I was a financial advisor for, you know, years, 2530 years, and then suddenly, I don't understand anything anymore. Because after the financial crisis, all the rules changed about the way I mean, money became, you know, there was a time about a year ago, if you wanted to buy a house in Denmark, they paid you to borrow the money. I am not kidding you. They paid you to borrow the money, it was money and buy a house. Okay. And so and I like the firm belief that money should be worth something if I borrow money from you guys. I should pay for it. It should have a value. And when you put the interest rates at zero or base, the risk free return at zero, all the calculations that I grew up trying to understand how to value markets when you know just went away.

Shawn Weber:

Yeah, yeah. It's interesting. And I just I think it's really important for folks to think about you're making a business decision. You know, a lot of times people make decisions about the real estate you probably see this all the time Bob when people are buying real estate or selling real estate, they, they they they make an emotional decision.

Robert Flynn:

We try to emphasize with them that it's your your house, your home and your investment. It's the house first and find the house but you may get a home and it makes itself an investment if you do it correctly. But you know, I was thinking with people keeping their homes in a divorce situation they may want to ask themselves just as with an investment, you know what I invest today in in this is the house I want to be and you know, they sometimes I think people stay through inertia and they're fighting To keep the life they had

Shawn Weber:

well, and it feels safe to scuttle, this is where I am. This is where I feel safe. This is where I feel comfortable. And

Mark Hill:

we have the colleague who calls it a marriage Museum,

Unknown:

right? Yes, yeah. Oh,

Mark Hill:

yeah. And and it's sometimes it is the only stable thing in a person's life where they feel everything else is falling apart. So you can understand the reluctance to, you know, move immediately, but employing some planning and looking at cash flow and understand, I had a lady once who kept her house. And she literally five years down the road, she'd retired from a government job, her husband didn't make a huge amount of money. He actually given her the equity because he felt guilty about an affair he'd had for 20 years, apparently. And, you know, she'd retired early from her job. And I pointed out to her by running some spreadsheets that she was really out of money in four or five years. You know, the kids were we gone off to college, she was a woman in her 50s. And I told her this, and she said to me, and this is not an exaggeration. If I need to go and turn tricks on Oceanside Boulevard to keep that house, I will do it. Yeah. And I she will look me straight in the eye and said that, and I think she was joking, but I mean that the vehemence of the response just tells you there was a lot more attached to that house, right? Yeah.

Shawn Weber:

I like how you said you think she was joking, but why?

Mark Hill:

Sure. How, look, I saw the financial, I saw the cash flow. I you know, I was thinking, ma'am, you're gonna have to work a large number of hours.

Shawn Weber:

I was gonna say, what, what is the what is the cash flow on turning tricks on? You know, probably not sufficient for this.

Mark Hill:

I do not have

Robert Flynn:

the data. Well, there really shows and she's a fighter. And she's claiming to

Shawn Weber:

yeah. That's the point.

Robert Flynn:

She had been a source really apparently.

Mark Hill:

I don't I often wondered what happened to her because she did take we did do the settlement. And this was probably 15 years ago, at least so

Shawn Weber:

well, there was a judge in town. If the parties couldn't agree on what was gonna happen with the house, I heard this order many times he would say the party shall go to the nearest century 21 broker and will list the house for sale forthwith. You know, he didn't he didn't even let him pick the the broker is the nearest one geographically to you. I don't know what he had for century 21. You know, he is a century 21 broker,

Mark Hill:

his wife was the closest one to the maybe, I

Shawn Weber:

don't know. 21? Or any

Mark Hill:

age you can get Bob.

Shawn Weber:

Yeah, yeah. But he always make that argument. It was the Solomon thing, right? It was, yeah, we're gonna cut the baby in half. And if they can't agree on what happens with the house and out, we're gonna sell it. You know, that can happen.

Robert Flynn:

Yeah, I tend to think that if a conversation doesn't demonstrate to both parties, that it makes sense business sense to keep the house, probably everybody is better off, liquidate or liquidating as quickly as possible. Moving on, but the cost of that coincides with self interest do so well. And that's I don't mean it that way is it's just

Shawn Weber:

not I know what you mean. You know, what does happen is people will be in the, in the marriage at a certain lifestyle. And they're used to maintaining that lifestyle. But what Mark and I have learned is that you can expect a 10 to 20% reduction in your standard of living because it costs more to buy two gallons of milk, then But does the by one gallon of milk when you're living in different households just cost more. And what they don't realize is you may have just been afforded in that house at the marital standard of living, but now that you can't pull your resources anymore, you're it's just out of reach. Right? And, and it's better to just make the decision to sell and get a clean sleep slate and start over again, on real estate than it is to become house poor.

Mark Hill:

But the thing is that in most divorces, people are not thinking in terms of what can I afford? They're thinking in terms of what can I keep and what can I get?

Shawn Weber:

What can I yeah, what can I hold on to and not

Mark Hill:

exactly exactly because, you know, I always say this to people, you know, guys would say to me, I have a net worth of four or 5 million bucks. I go to NATO. And they say what do you mean I you know, I said, well, you're a married man, right? Yeah. How long you've been married. 26 years. Good for you. Were you rich before you got married? Oh, no, no, no, it's it's all happened in the last 10 years. Right? Okay, well, okay, divide by two, community property state, but no one feels that way. So just the concept of a divorce is a loss. And then there are expenses associated with it, that will be an even further loss. So you come in with a negative kind of a situation from the from the outset, just in terms of perceiving, you know, where you are financially.

Shawn Weber:

Yeah, you're in for a new paradigm, right? Well, you know, the good news is, if you're selling a house, it's a good time to sell, right. And so if you're great, if you're in the divorce, and it's time to sell, you know, good for you, you got in at the right time.

Robert Flynn:

You know, people have enough equity, I like to think in terms of seniors, the seniors are frozen in their homes. I know, we're not talking about seniors right now. But

Shawn Weber:

yeah, although we are seeing a lot of older people getting divorced than we used to know they

Robert Flynn:

have a ton of equity in their property. And they're afraid they can't find another property, but they're in the driver's seat. They're almost all cash buyers are right to the top and a lot of divorcing couples who have a lot of equity could find themselves in that same situation. But they're downsizing. Yeah. Yeah. Hey, I really am thrilled to have the opportunity to join you, Shawn over Weber dispute resolution. Yeah, but you guys are so well recognized.

Shawn Weber:

Well, it's glad I'm glad to have you on our panel. You know, it's it's it's it's good to know that, you know, I can we can resolve any kind of dispute, not just a divorce. But if there's a civil dispute, and you've got such a background and dispute resolution, that it's just great to have you on board.

Mark Hill:

And Bob, I did mention this, but I'm also trained in collaborative estates and trusts. And I've actually given trainings in models that do that we were brought in by Maryland courts a couple of years ago to teach them how to get their court docket down.

Robert Flynn:

So we should talk about other things to ensure it will be a

Shawn Weber:

pleasure. So we've done it again, we've we've spent another half hour or so talking about some interesting things in the divorce world and it's always nice to have a guest Come on our show, Bob, so I'm glad you came to be with us. If somebody needed to get ahold of you either for real estate questions or for other things, how would they do that? easiest way is

Robert Flynn:

Robert H. Flynn. He is for Henry not one way or the other you know, saying anything about Henry's name when I was a little guy didn't didn't like it that much, but Robert H Flynn at fairway residential calm.

Shawn Weber:

So So Mark, if people want to talk to you about the financial impact of their marriage,

Mark Hill:

you'd go to Pacific divorce management's website, which is www dot Pak divorce.com pa c di VORC e.com. And our phone numbers and contact information is all there.

Shawn Weber:

Well, if you have any kind of dispute, whether it's a marital dispute or a child dispute or some other kind of dispute, go to Weberdisputer solution.com that's Weber with o e be like the grill, Weberdi puteresolution.com and we wil match you with a mediator who can help you resolve your dis ute. Thanks for listening to ano her episode of the three Wis man of divorce, money, psy h, and law. If you like what you heard, be sure to subscribe, lea e us a review and share with oth rs who may be in a similar pla e. Until next time, stay saf , healthy and focused on a pos tive, bright future. This pod ast is for informational pur oses only. Every family law cas is unique. So no legal, fin ncial or mental health adv ce is intended during this pod ast. If you need help with you specific situation, feel fre to schedule a time to speak wit one of us for a personal con ultation.