Buy Low, Divorce High

NEW YORK TIMES 8/12/07

Kirk Condyles for The New York Times

MONEY IS FREEDOM Sharon Sheinker and her ex will split the profit on the sale of their
$1.4 million home.

By CHRISTINE HAUGHNEY
Published: August 12, 2007
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.

Phil Marino for The New York Times

TUG OF WAR Susan Katz and her ex-husband have been fighting over their Roslyn Heights,
N.Y., home for three years.

The client, a former high-ranking fashion executive and perpetual volunteer at her childrens
private schools, was checking the price she could get for her nine-room co-op in a prewar
building. When the market reached a high, she told Ms. Kleier, she planned to divorce her
husband, sell the apartment and live on her share of the profits.
Last year, Ms. Kleier delivered the long-awaited news: Manhattan luxury apartments were at a
peak. The client went through with her plan. Now the woman calls from her new condo in
California, raving about the weather and the distance from her ex-husband.
She felt that she couldnt walk out on him until she had the money to move away and buy
something on her own, Ms. 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 like therapists and lawyers, along with real estate
brokers, say unhappily married couples are cashing in appreciated homes to underwrite a split.
The equity that there is in real estate is one of the impetuses why there are so many divorces,
said Nancy Chemtob, a Manhattan divorce lawyer, adding that the net worth of her clients has
doubled in the past three years mainly thanks to 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 the real estate
brokers Brown Harris Stevens.
A spouse who has not worked, like Ms. Kleiers 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.
No matter what the net worth of the client, Ms. Chemtob said, the $3 million apartment is
now the $7 million apartment, and the $7 million apartment is the $14 million apartment. Half of
a lot is a lot.
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 legally separate
easier.
The former couple made enough on their first 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, on 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 Ms. 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, Ms. Sheinker said. I dont 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 over all,
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, Dr. 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 Dr. Becker, who teaches at the University of Chicago.
Dr. Becker, who won the Nobel Prize in 1992, also explored in his divorce study the economic
argument for what many people today 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.

Kenneth Mueller, an East Village psychotherapist, says he has about a half-dozen clients who are
real estate executives. Some, he said, have used windfall wealth from property to strengthen their
marriages like paying for counseling or adopting children. But others are emboldened to
divorce and remarry. He said some men conclude that they can find a new spouse because their
first wives were not what I really wanted.
Of course, not all couples sitting on greatly appreciated homes are headed for divorce court. The
likelihood of divorce depends on the strength of a marriage before the advent of unexpected
wealth, according to Evelyn Lehrer, an economist who expanded on Dr. Beckers findings in
2003.
In her study The Economics of Divorce, published in the book Marriage and the Economy:
Theory and Evidence From Industrialized Societies, Professor Lehrer concluded that couples
who are likely to divorce after an unexpected change in assets often had weaker marriages to
begin with. It is not the new wealth that causes the divorce; the money is just the catalyst.
Stephanie Coontz, the author of Marriage, a History: From Obedience to Intimacy, or How
Love Conquered Marriage, compared the current Gilded Age to an earlier one in the 1920s,
when, she said, divorces spiked at a time of rapid wealth creation. In times when people
accumulate wealth, she said, they often think they dont have to abide by societys conventional
rules.
When people get a lot of wealth in a hurry, its more easy to act upon their impulses, she said.
You get used to sending back a steak because you dont like it. You send back a wife.
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, Dr. Goldstein said. If they cant 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 that real estate battles with her exhusband 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.
Ms. Katz finds that some women who are divorcing cant 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 dont realize how much this house is mortgaged.

And then there are cases in which couples decide a divorce settlement would ultimately be too
costly because of the on-paper appreciation of their property.
One New York real estate executive, who has separated from his wife and would not speak on
the record because he is unsure if he will divorce, said most of his peers in the industry who are
unhappily wed seem to be staying put. They dont want to carve up the real estate portfolios they
bought or built during the boom.
I know plenty of people who are enormously wealthy and just dont want to cut it up, he said.
They find it hard to divide the real estate.
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