Should You Sell Your Home during a Divorce?
When in the middle of a divorce, many different things will come to mind. One of the first things you might consider is whether or not you should sell your home. Sometimes, depending on the circumstances, you may not have a choice. In some situations, a judge may determine that you must sell your home and split the proceeds. Divorce and selling a home are most likely two of the most stressful, trying events that you’ll encounter. Going through both at the same time just flat out sucks. They can make the stress much, much higher than dealing with just one of the two life events by itself. Questions surrounding owning a home will become harder to deal with when you are facing a divorce.
For many married couples their home is the largest asset they have, not to mention the sentimental value the home may have. Even though the owners may want to hang onto it, many times the situation demands selling the home. It may be because of financial, legal or personal reasons, but when all is said and done they are not left with any other option besides selling the home.
It’s important to know how divorce affects the sale of a home, including the reasons for selling in the first place. Even though a divorce is emotionally trying, a bad move involving a home can end up affecting you negatively for years – long after the divorce is finalized.
Most couples who go through a divorce end up going with one of these 3 options:
- One will buy out the others legal interest and keeps the home.
- One spouse keeps the home for a specified period of time, usually until the youngest child turns eighteen at which time the home can be sold.
- The house is put on the market and sold immediately, and the proceeds are split.
Selling a home while getting divorced is no doubt difficult and sensitive. Don’t underestimate legal and tax ramifications. But with the help of a great attorney, tax professional, and Realtor, it can be done successfully.
Legal Reasons For Selling a Home in Divorce
Unless the divorcing couple can find a way to deal with each other amicably, the division of property and specifically the family home is not cut and dry.
Each person contributed to the purchase of the home – which is almost never 50/50 – and naturally, each wants their fair share of the home’s equity. If the couple can’t arrive at an agreement outside of court, either on your own or through mediation with your attorneys, the court will decide for you. As you can imagine, this is not a pleasant experience for most homeowners. The judge hardly ever rules in a way that both parties are happy with.
This is exactly why it is always advisable to come to an agreement before it gets in front of a judge, if at all possible. More often than not, the easiest solution is to sell your home and split the equity. Dividing the couple’s assets becomes much easier after selling the home because they’re not trying to determine a future value of the home, which will usually cause yet another argument. You can find out what your home is worth by hiring an appraiser, or by calling a competent, knowledgeable local Realtor who should be more than willing to value your home for free.
Financial Reasons For Selling a Home During Divorce
Selling your home during divorce obviously creates some important financial considerations. Because you were married, chances are that qualifying for your mortgage was taking into account both of your incomes. Once that income is cut in half, you quickly see why two incomes were necessary to pay for it. Even if your income is the higher of the two, the mortgage principal, interest, insurance, property taxes, utilities and the general upkeep of the home can quickly eat up all your money! It becomes too expensive for most people to handle.
Then comes the tax implications, specifically capital gains tax. The current capital gains tax law says that if you are married filing jointly and selling a home you can be exempt from being taxed on up to $500,000 in profit. If you’re single the capital gains exemption gets cut in half to $250,000. To be eligible for this exemption it is required that you have lived in your home for at least two of the last five years. The home must be your primary residence and not an investment property or second home. For specifics on your personal tax situation, please speak to a qualified tax professional.
The Bottom Line
In summary, here’s the bottom line: Essentially what all this means is that there is a huge financial incentive to sell the home while you are still legally married. Selling your home will allow for up to $500,000 in profit to be excluded from federal capital gains taxes. Half a million bucks!
If you have owned your home for a long time and you have a big chunk of equity, this can translate to a HUGE tax savings. If just one party decides to stay in the home but plans on selling sometime in the future, they’ll most likely miss out on a very large tax savings. This makes selling a home while getting divorced something that needs to be planned for carefully.
Emotional Reasons For Selling a Home
Divorce and selling a home often times go hand in hand because of the emotional issues that usually follow when keeping the property. You have so many memories in your home, including raising children, pets and any renovations or improvements that you have done to make it yours. With the departure of your spouse, though, the once happy home can quickly become unpleasant to live in, sometimes even painful. Many people want to avoid these negative feelings and emotions that are totally normal during this tough time.
This is usually why the spouse who kept the home may eventually feel that keeping the house was not as good of an idea as it sounded at the time of the divorce. It’s easy to look past, and even underestimate the emotional factors that exist. So many things go through your mind during a divorce that it’s easy to overlook how you may feel later on down the road.
How To Sell Your Home During Divorce
Selling a home during a divorce is very similar to selling real estate any other time… except that you MUST think about, talk about, and determine before the sale who gets what. Are you splitting the equity in the home after it sells? Is it a 50/50 split? Selling your home for fair market value will be possible when you hire a top Realtor – as long as you actually follow your Realtor’s advice in regards to the strategy and specifics of selling your home.
This decision making process is where your attorneys need to be involved. Let them guide you both through the process of deciding who gets what. You’ll need to know what your home is worth as well as how much money you have put into the home in terms of improvements and/or renovations.
Once this is decided, bring in your experienced, reputable real estate agent – one who you have hired based on interviews, credentials and online reviews – and get your house on the market. Follow your Realtor’s advice, and be willing to compromise a little bit to get the job done. Selling your home for a little less than what you might want will only help to get the home off your hands faster and help you both move on with your lives. For example, if pricing the home a hair under market value in order to sell faster helped it sell 3-4 months faster, would that be worth it to you? Most people in a divorce situation would say Yes.
The Realtor You Pick Is Important
Don’t underestimate the importance of picking the right divorce Realtor. When selling a home during divorce you will want to work with a divorce Realtor that has exceptional communication skills, and experience navigating the sensitivities and intricacies of a divorcing couple.
There’s a good chance that both parties might not exactly be getting along so well anymore, so you want to be sure to work with a divorce Realtor who understands the nature of divorce and all the emotional baggage that can come with it. The Divorce Realtor you decide to hire will need to have a high level of patience, as many communications may need be repeated multiple times to each party.
Do your best to decide on the Realtor together. This is very important! As a real estate agent who has worked with divorcing couples on numerous occasions over my real estate career, I have found that if only one party chooses the Realtor, the other party will feel cheated, or that the Realtor will benefit one party more than the other. It’s human nature to worry that the real estate agent is going to play favorites because they may have more of a relationship with the other party.
Whenever I’m brought in to represent a divorcing couple, I insist that both parties are present for interviews or pre-listing meetings occur. I want it to be crystal clear to them that I represent both of them equally. No taking sides, no playing favorites. Selling the home for as much as money as possible, in a reasonable amount of time, with the least amount of headaches is top priority. Simple as that.
We need to begin by creating an environment of trust where either party can reach out to me at anytime. In fact, the success or failure of selling the home in a timely manner depends on it. Divorce is stressful enough all by itself. Adding a home sale on top of it can make you feel like your head could explode at any moment. Reducing your stress by making the sale process go as smoothly as possible is always one of my goals.
Think of it like this: You have a problem. The divorce Realtor you hire is the problem solver. Your real estate agent should not only have some experience with selling homes during divorce, but also a strong track record of success. Selecting a Realtor is an incredibly important decision with wide reaching implications, yet so many sellers do not take the time needed to really make a smart decision. Don’t be one of these people. Choose wisely.
Divorce and selling a home at the same time can be tricky. Make sure you are well prepared, hire a great divorce Realtor, and follow their advice! After all, it’s just your piece of mind, sanity, and financial wellbeing that are at stake! J
More Resources for Divorce and Selling a Home:
- How to split proceeds when selling a home and going through a divorce by DivorceNet.com
- How to Buy and Sell a Home at the Same Time
- Tax Tips for Divorcing Homeowners by Bill Gassett
- When Should You Hire a Real Estate Attorney? by Paul Sian
Use these additional resources to help you decide whether or not to sell a home during a divorce. When selling a home during divorce, you should always consult with an attorney, as well as a competent financial advisor.
About the Author: The above article on How to Sell Your Home During a Divorce was written and provided by EAP Homes, a leader in the field of Real Estate sales, marketing, and smart home technology. Chris can be reached via email at [email protected] or by phone at 801-455-8753. Chris has helped many people buy and sell Salt Lake City area homes for years.
Thinking of selling your home? I have a real passion for buying and selling Real Estate, as well as marketing & smart home technology. I’d love to share my expertise!
I help people buy and sell real estate in the following Salt Lake area cities & neighborhoods: Holladay, Cottonwood Heights, Millcreek, Olympus Cove, Canyon Rim, Sugarhouse, Midvale, Murray, East Millcreek, Sandy, White City, Draper, Riverton, Daybreak, South Jordan, West Jordan, Herriman, Bluffdale, South Salt Lake, The Avenues, Federal Heights, and of course, Salt Lake City.
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