5 Ways Your Divorce Lawyer Saves You Money
There’s a myth out there about lawyers – they want to over-charge you by racking up those “billable hours.”
Grant it, there are always bad players in any industry. And, admittedly in contrast to these bad players, by God’s grace and the kindness of so many great attorneys, I am connected with a great number of wonderful, generous and magnanimous lawyers, Texas’s family law attorneys. For whatever reason, the divorce lawyers I see and with whom I interact, have the highest standards of ethics. They are truly interested in helping children and individuals blunt the otherwise ill effects of a traumatic event, divorce.
I can honestly say that I trust these attorneys and esteem them highly; as professionals and as individuals. I am fond of them all.
The myth is not true. Attorneys do not wish to simply rack up unnecessary “billable hours” and over-charge their clients. The opposite ethos prevails. They want their clients to get a good deal and they only wish to be paid for their honest work. It’s actually to their advantage that their clients get more value than what they pay for….a “good deal.”
So, I thought I would list out how my attorney friends – specifically, the ones who refer their clients to me for mortgage financing – are saving their clients money. These are real examples representing real dollars. But, some of it unseen because the savings is, sometimes, simply a reduction in the cost of doing business and the client never sees what costs would have been had they not been referred to me.
Here are the five ways…
1. Appraisals. It’s amazing that many lawyers still have clients ordering appraisals - sometimes two – in a divorce process. The couple wishes to determine a value of what is usually the largest asset they own. These appraisals cost about $500 each and are, many times, disparate in their reporting of “opinion of value.”
For several years now (since May 1, 2009), the only appraisal that is usable for mortgage financing is the one ordered by the lender. So, if mortgage financing is going to be needed (for refinances and buyouts), then any other appraisal obtained is totally useless. Not only is it useless – it is a forbidden practice that the lender’s appraisal (and the appraiser who is chosen in a black hole / round robin type selection process) be influenced by any other appraisal. This means that the appraisals ordered by the unaware attorney are a total waste of money.
What if no mortgage financing is required? It’s still a waste of money – to order appraisals outside the lending process - because the appraisal report is not to a real estate professional and the numbers are too easily “fudged.” You see, appraisals are reports to an individual or a firm or a company/lender. This is why two appraisals - one ordered by husband’s side, the other by wife’s side – are frequently disparate in reported value. The appraiser knows that folks outside the lending process will be reviewing the appraisal. When a lender orders the appraisal, the appraiser knows that their report will be reviewed by an AMC (Appraisal Management Company), scrutinized by the Loan Originator and underwritten by a trained and accountable underwriter. Not so much funny business.
So, what to do when no mortgage financing is contemplated – there’s still a way to get an accurate appraisal. Either 1) have your attorney tell the appraiser that you are going to have a lender (me, Noel Cookman) review this appraisal and you want it done to underwriting standards; or 2) have the grantee (the person who is going to be awarded the house) contact me, do an application; and, we’ll order an appraisal for the sole purpose of providing accurate information for your divorce settlement. It’s a better, more realistic appraisal, devoid of the sort of manipulation that could otherwise affect the “opinion of value.” It’s a bit of work for me and my team but we gladly do it in order to serve our wonderful referring attorneys. Our goal is to make the attorneys and clients happy. That’s just one way to strive to do that.
2. Less Time = Lower Fees. When you and your attorney do not have to spend a lot of time wondering about whether or not you can finance the house or buy a new house or what is required to qualify, you will spend less time in your attorney’s office and therefore spend less money getting your divorce final. Attorneys do not want to charge you for their time if they are not dispensing good LEGAL advice. And when they have to dabble in real estate, mortgage finance, etc. during your session, you get nowhere and the attorney’s reputation is at risk because they are getting away from their expertise – the law. The perfect situation, I’ve often thought, is for a potential divorce client to speak with me first about the house and finance issues. What if the client could walk into their attorney’s office and say “I can qualify to refinance the house and perform a buyout of my spouse’s interest and I have an Assessment/Approval from Noel Cookman that outlines the conditional loan approval?” Turns an hour of wondering into five minutes of knowing.
3. If you mediate or collaborate. Preparation is the key to saving money when you are mediating or collaborating. Experts (mediators, attorneys, financial neutral experts, mental health and communication experts, et al) have to be paid and, generally speaking, when an hour is gone, they cannot charge for unused time. So, every minute is valuable; or, I should say, costly. When your attorney connects you with me, you will enter each meeting prepared. You will know the answers to a plethora of questions that nearly always come up: Can you afford the house (whatever that means)? Can you refinance the house and get the loan out of your spouse’s name? Can you include a buyout to pay your spouse for their interest in the property? How much? What does the property appraise for? How do we know? Who says? Who or what determines what value we should agree on for the property’s value? How much of it can be financed (Loan To Value ratio)? When can the loan close…how long after final divorce? What agreements are required in order to successfully close your loan? How much support is required (if any) for you to qualify for financing? How long will it need to continue?
These questions - and the discussions that ensue – often eat up many hours…and many times, at the end of the discussion, no real-time, solid, verifiable answers are apparent. Everyone is left with the need for more research; or worse, guess work guides the agreement. Answers to all of these questions (and more) can be obtained before mediation/collaboration (or any other sort of meetings) by connecting with me in advance. I can cut hours off of the time spent in such meetings. The client and his/her attorney enters the meeting prepared with my unique Assessment/Approval which outlines exactly how the transaction can close, ex-spouses paid and removed from liability (in refinance buyouts), how long it will take and what conditions must prevail.
This service alone can save hundreds of dollars.
4. Take advantage of free valuable services. In the divorcing client’s world, professionals are paid one of two different ways: 1) by charging for their time or 2) by charging for a job or transaction. Professionals like me make our money by the transaction. We don’t charge by the hour.
(Mortgage originators cannot, by law, charge by the hour….our compensation is a matter of regulations and is a fixed amount based on the loan itself, not the work that we perform to close that loan. Incidentally, this is not a benefit to the consumer but rather the concoction of starry-eyed Marxist staffers on Capitol Hill and in the regulatory agencies like the misnamed Consumer Finance Protection Bureau; I am afield from the purpose of this article but, if you know me, you know I cannot help myself).
But, do you realize what this means? At least when you use my services, it means that you can take advantage of my expertise for free. No, I really mean FREE. Here’s how it works. You are going to get mortgage financing anyway. So, the cost of financing is a foregone conclusion. By using me, you get competitive mortgage financing AND my financial/mortgage expertise: Taking the application before (not after) final divorce; providing conditional approvals with specific steps to proper settlements which enhance your mortgage qualifying; staying abreast of your divorce and making sure your mortgage loan approval is continuously updated so as to reflect the settlement (take the guess work totally out of your divorce-related financing); a written Assessment which is a report to your attorney
Now, how is that NOT an example of your attorney saving you untold hundreds and thousands of dollars?
5. Mortgage financing done right. This one is a little hard to explain. I usually just accept the fact that I’ll be doing a great service for folks but they’ll never truly understand what I’ve done. So grant it, you’ll have to take my word for it to some degree.
There is a right way and a wrong way to approach mortgage financing for divorcing folks. The wrong way is more expensive (comes with higher interest rates and more restrictive terms) and sometimes simply produces a loan denial. Okay, you need an example. I’ll give you two. And, these are part of my “secret sauce” so, in a way, I hope that some people DON’T read this.
When buying out a former spouse in a refinance transaction, it’s important that the borrower not “cash out” but rather have their loan structured as an Owelty lien. Cash out financing, especially in Texas (but in other states as well), comes with a higher relative interest rate and permanent restrictions on the property’s financing. But, that’s the wholes story. Rarely should the buyout be stated as the actual or “net” buyout to the spouse. There are several reasons for this. Now that will have to remain part of my “secret sauce.” It should be sufficient to say that I innovated the creative use of the Owelty buyout in financing which has enabled so many people to get better financing. At the end of the day, the customer has a better deal even though they may not realize it.
Here’s a second example. When structuring a buyout, many times a borrower’s debts exceed the allowable limits. The term is “debt to income ratio.” Often, I recommend a particular structure to the settlement and financing that effectively allows the mortgage to leverage this debt into a lower ratio. Again, this must remain part of my “secret sauce.” I can only tell you that I do it quite routinely now and have for about 10 years now. Even though people in my industry say it cannot be done, I just keep on doing it…legally, ethically, with no problems. In fact, we eliminate problems. The end result is that newly divorced home owners have significantly lower payments (for their entire budget) than otherwise. They are much better off.
So, why would an attorney actually prefer to charge you less (by working fewer hours on your case)? Because they want something more than a few more dollars from you – they want happy clients? That’s why they look for extra value. That’s why they refer you to me? It’s not just because they like me….I hope they do like me and my services. But, it’s for a reason – it helps you.
Okay, so it is the attorneys who are referring their clients to me who are saving them significant amounts of money. The good news is that more and more Texas family law attorneys are doing this. And, my team is growing commensurately to take care of the gargantuan need.
Yes, Texas family law attorney are the grandest professionals in the world. I’ve met and know hundreds of them, maybe a few thousand. And, I love them all. I can honestly say that they are magnanimous and awesome. They truly seek what is best for you and your family. This article explains just one way they look out for your best interest by referring you to me and, thus, saving you real, tangible dollars.
Thanks for reading. Write me and tell me if you enjoyed this or benefited in some way. I appreciate hearing from you.