We have spilled a lot of ink discussing the importance of divorced people thinking about how their assets are invested. For divorce lawyers, one of the ugly sticking points is residential real estate. What do we hear? “It’s the house the kids feel secure in.” “It’s the house I grew up in.” “I love my neighbors.”
There is nothing wrong with having these perspectives. But, at the end of the day a house is a dwelling… a piece of property. Houses were always considered bedrock investments. They seemed to always appreciate over time. The 2008 crisis reminded some of us that whatever their sentimental value, sentiment doesn’t pay the bills or secure your retirement. We have seen a rapid rise in home values in the past seven years but they still don’t rival the returns coming from investment in securities.
Reports have circulated through CBS and Newsweek that a real estate tracking firm called ATTOM reports that more than 350,000 homeowners across America ponied up their homes to banks and other lenders during 2025 because the homeowners had defaulted on their mortgage payments. Map shows states where foreclosures soaring – Newsweek Let’s take a look at how that typically works.
You bought your house in Happy Valley, Pennsylvania in 2022. You paid $500,000 and borrowed $450,000 of that purchase price. In 2024 you were abruptly “downsized” and reduced to unemployment benefits that are less than your monthly mortgage. By the time we figure transfer tax and costs of sale, you really have no equity in the property. You could try fighting the foreclosure, but what defense do you have when you simply could no longer pay? Banks also loathe mortgage foreclosure proceedings because they are slow and expensive. So, they offer what is termed a “deed in lieu” of foreclosure transaction. You just vacate the property and sign over the deed, leaving the bank to sell the property. When they sell the property, if there is a loss to them, they circle back and seek payment of any deficiency. At other times, they may just release you from the debt because you have cooperated and their loss is not worth pursuing.
Lenders HATE managing empty properties they have to sell. They have to insure the property at high rates (no one is in it) and pay the real estate taxes until the property is sold. In olden days, each local bank would have a department assigned to deal with these albatrosses. At least those people knew the neighborhoods and what properties were worth. Today, your local bank closed with you in 2022 but instantly sold your mortgage to Timbuktu Private Capital, a company based in Grenada. Those folks need an atlas to find Pennsylvania, let alone Happy Valley. They hire someone in the phone book to manage the property in terms of paying insurance and taxes and trying to keep the lawn less than waist high. They try listing the property for what you paid, but if they don’t get a quick response they tend to dump the property for whatever they can get. Yes, the house down the block sold six months ago for about what you paid in 2022. But, if they see “no action” from buyers and some private equity firm based in Bermuda offers $375,000 cash, without contingencies, so your house becomes part of their rental portfolio, expect to see a sale. Your house is just a commodity. Yes, had they been patient, they could have gotten $425,000. But, in their world, $50,000 is not worth the wait or the effort. Plus, unless your arrangement with the lender has a deficiency waiver, the lender can enter a judgment against you for any deficiency.
California, Texas and Florida are the markets where there is most distress. Unfortunately, distress can be infectious. Pennsylvania is a pretty stable market and Allentown has even achieved Zillow’s hot list of places to buy in the U.S. Ironically, you might be OK here in the Keystone state, but your beautiful condo in Tampa has seen condo fees and insurance double since you bought it. Mortgage defaults and subsequent quick sales by a lender can destabilize markets everywhere in a day when you can quickly see what houses in your neighborhhod sell for.
In short, the only thing about real estate that seems certain to rise is the expense of owning it. If you are dividing real estate in a divorce, be careful what you ask for and whether you can afford it.