For years, Michele Kleier, a real estate broker on the Upper East Side, knew why one of her most persistent clients was calling even before picking up the phone.
The client, a former high-ranking fashion executive and perpetual volunteer at her children’s private schools, was checking the price she could get for her nine-room co-op. When the market reached a high, she told Kleier, she planned to divorce her husband, sell the apartment and live on her profits.
Last year, Kleier delivered the long-awaited news: Manhattan luxury apartments were at a peak. The client went through with her plan and bought a condo in California.
“She felt that she couldn’t walk out on him until she had the money to move away and buy something on her own,” Kleier said. “The real estate market allowed her to buy her freedom.”
A little-noted side effect of the property boom of the past decade has been the real estate-enabled divorce. Home values might have slid in some markets, but in the New York City region, where prices remain high, divorce professionals such as therapists and lawyers, along with real estate brokers, say unhappily married couples are cashing in homes to underwrite a split.
“The equity that there is in real estate is one of the impetuses [for] … so many divorces,” said Nancy Chemtob, a Manhattan divorce lawyer, adding that her clients’ net worth has doubled in the past three years mainly because of real estate. The price of the average Manhattan apartment was $1.3 million as of June, up 7 percent from a year ago, according to real estate brokers Brown Harris Stevens.
A spouse who has not worked, such as Kleier’s client, might decide that with a divorce settlement enriched by real estate, it is possible to maintain a comfortable standard of living. Or a breadwinning spouse might recognize that even after dividing community property, it will be possible to live well as a single person.
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That is how Sharon Sheinker thinks about the real estate equity she and her ex-husband accumulated over a 16-year marriage, which she said made the decision to separate easier.
Comfortable profit
The couple made enough on their apartment in New Jersey, and then on a second home on Long Island, to build a five-bedroom house in a gated community in Dix Hills, Long Island, four years ago, for $1.1 million. They recently signed a contract to sell the house for $1.4 million, less than the asking price of $1.579 million. But Sheinker calculates a $60,000 profit each year over the past four years. She will use her share to buy a smaller house in Dix Hills and continue to run a charity, A Gift From Alexa, in honor of her 6-year-old daughter, who is autistic.
“Money is freedom,” Sheinker said. “I don’t need the mansion. We made enough money to be able to get divorced and support two households.”
Economists are familiar with this phenomenon. Even though divorce rates are declining overall, as far back as 1977 the economist Gary Becker showed that couples experiencing any unexpected, drastic rise in net worth are at risk of divorce. (The same holds true for a drastic decline in net worth.)
Extrapolating from survey data, Becker concluded in The Journal of Political Economy that “a greater deviation between actual and expected earnings increases the probability” of divorce.
Although couples who see their incomes rise steadily generally stay together, those who make more money than they ever expected are vulnerable to divorce. They realize that they are less financially dependent on each other and that they might have chosen different spouses if they had more choices at the time, said Becker, who teaches at the University of Chicago.
Economics of divorce
Becker, who won a Nobel Prize in 1992, also explored in his divorce study the economic argument for what many people call trading up, or finding a trophy spouse. Noting that 75 percent of men and more than 70 percent of women remarry within 15 years of a divorce, he found that divorced men with higher earnings have the greatest likelihood of remarrying.
This implied, in his view, that men who have come into wealth have an incentive to divorce because they believe they could better their situation. “They feel, given their status now, they can find other people of a type that appeals to them more than when they got married,” he said in a telephone interview.
Real estate these days seems much on the minds of couples who are in counseling. Elyse Goldstein, an Upper East Side psychologist, said that half the couples she has seen in recent years have brought up real estate as a relationship issue, and 15 percent regarded it as a serious one.
“Real estate has become a language of emotional barter in terms of registering pains, hurts and resentments,” Goldstein said. “If they can’t have love, they can have real estate. There are a lot of fights about who is going to benefit from the windfall.”
Susan Katz, a fashion industry sales executive, said real estate battles with her ex-husband over their home in Roslyn Heights, on Long Island, have dragged out over three years, involving three lawyers and $350,000 in legal fees.
She said that real estate was not the original cause of the divorce, but it has become the central issue as she and her ex-husband fight over what the house is worth and how much she must pay to buy it from him. Katz says some women who are divorcing cannot cash in on the value of a home because they or their spouses borrowed against it. “Women think when they get divorced they can have half of the house,” she said. “Most women don’t realize how much this house is mortgaged.”