DISCLAIMER: As a friendly reminder, this blog post is meant to be used for educational purposes only, not legal advice. If you need assistance navigating the legalities of selling your home before or after a divorce, HomeLight always encourages you to reach out to your own advisor. If there’s anything harder than working with someone you don’t like, it’s working with someone you used to love. And, when that collaboration is essential to protecting your most valuable asset, it’s easy for emotional issues to override good business skills and decision making. That’s why selling a home during a divorce can be especially treacherous for uncoupling couples. Fortunately, with guidance from the right Realtor, you can still close a successful home sale that allows each spouse to walk away with the maximum amount of equity. HomeLight experts such as Illinois agent Dawn Bremer and Texas agent Dawn Fore specialize in working with divorcing or divorced clients, divorce and real estate attorneys, mortgage lenders, potential buyers, and even the conditions dictated in divorce decrees and custody arrangements. One of the first questions clients ask is: Should I sell the house before or after the divorce? While each family’s situation is unique, here are some drawbacks and benefits HomeLight’s agents suggest their clients should consider. Selling the home prior to the divorce definitely saves time, money, and hassle because you pay only the routine real estate fees associated with any sale. If you wait until during or after the divorce to list the house, each spouse is likely to submit the paperwork for review to that person’s attorney and pay hourly fees. “It’s easier if you sell the house before the divorce and escrow the money,” explains David S. Rubin, an attorney with 45 years of experience in Baton Rouge, Louisiana. “Then you’re only dealing with the cash. You’ve paid off the mortgage, and you don’t have a problem with indemnification of the borrower.” If you decide to pursue the sell-first strategy, be sure both parties are committed to the sale and stay legally married until the paperwork clears. Divorcing in the middle of a sale can jeopardize the transaction. Learn more: Do I Have to Sell My House in a Divorce? See 4 Options Let’s take a closer look at the benefits of selling a house before a divorce. The combined resources made homeownership affordable during the marriage. However, paying the mortgage, utilities, maintenance, and other living expenses is often difficult to do alone. Selling the property before the divorce is a great solution for couples who can’t co-own the property or afford the mortgage, upkeep, or the spouse’s buyout. Furthermore, if keeping the property puts a strain on your budget, the accrual of deferred maintenance, back taxes, or foreclosure will only cost more later. In fact, you may also need the cash from your home sale to satisfy the divorce settlement agreement. As the divorce becomes final, you’ll need to find a way to finance your new single life. According to the marital property laws in your state, you may be entitled to only half of your home’s value. However, if there’s a decent amount of equity in the house — which is likely to be your most valuable piece of marital property — those funds can go a long way toward financing your future. For example, the proceeds of your home sale can contribute significantly to a down payment on a new home, a short-term rental, or relocation expenses to move across the city, country, or globe. “My house is not ‘just a thing.’ It is an extension of my physical body and my sense of self that reflects who I was, am, and want to be,” wrote Karen Lollar, Ph.D, in her article for Qualitative Inquiry, a peer-reviewed academic journal. Whether it’s due to sentimental value or the property’s amazing amenities, selling the home you love can be heartbreaking. Still, it may be easier to move forward and develop a cordial and cooperative relationship with your ex, if you’re not living among the relics of your unhappy marriage. And a healthy relationship with your ex is always emotionally healthier for your kids. One of the biggest tax breaks for married couples is the capital gains tax exemption. Typically, if you sell the home while legally married, you can exclude up to $500,000 of the home equity from the capital gains tax. That means: As long as the sale closes before the divorce is final, both spouses will likely avoid paying taxes on their share of the equity. The more assets you can divide quickly and amicably, the less time and money you have to invest in arguing, court costs, and attorney’s fees. “You don’t want to have a contentious divorce where the homeowners utilize the asset of the property as leverage to get digs at each other,” says Bremer. “This is likely to be a couple’s biggest asset, and we want to get them the best price that we can.” So, the faster you can reach an agreement about the home sale, the sooner you can tackle lesser issues — or more contentious ones. Keeping your divorce private can be difficult. Not only is gossip annoying, but it can cut into your bottom line. If buyers believe the divorce has made you desperate to sell, they’ll surely lob lowball offers your way. One technique to keep your divorce undetectable to buyers is to make sure the home looks tidy and lived-in, with clothes in the closets, books on the shelves, etc. Still, if your divorce is likely to be the talk of the town, you may want to pursue a pocket listing or seek a cash offer rather than a public listing. A platform like HomeLight’s Simple Sale can help you receive a cash offer fast and preserve your privacy. “In most cases, if a divorcing couple knows they’re going to sell the house, they should get it listed as soon as possible because sometimes it can take months to get it sold,” advises Fore, who has 32 years of experience. That’s especially true now that the frenzied, pandemic-fueled, homebuying spree has given way to a more balanced housing market, which has been slowed by higher mortgage rates and inflation. As a result, buyers are more cautious. Homes can sit on the market longer, and sellers may need to agree to inspections and more concessions than in previous years. When the home sale proceeds are part of the settlement, the divorce may not be finalized until the deal closes and the equity check is in the bank. So, if every decision — the agent, price, staging, repairs — begins a battle with your soon-to-be ex-spouse, the home sale process can drag on and delay the divorce. Alternatively, it may be possible for your divorce decree to provide for the future sale of the home — which preserves your marital capital gains exclusion even if you’re technically divorced. While selling your home may be in everyone’s best interest, that may not stop your ex from being uncooperative. Unfortunately, warring spouses often make decisions — everything from setting the list price or accepting an offer — based on their potential to damage or simply incense the other party. “Even just getting the home ready to sell is more difficult during a divorce,” says Fore. Adding fuel to that fire: If the home sells before the divorce settlement, the couple is left to divide the proceeds from the sale and the home’s contents. Sometimes, the subsequent clearing out the possessions can ignite arguments over insignificant items previously forgotten in closets. The loss of a family member and the uncertainty that results from divorce affects every member of the household, from kids and older adults to pets. As everyone adjusts to the new situation, the home-selling process (with showings and other inconveniences) and relocation can add to the family’s angst and anxiety. Parenting experts are divided about whether keeping kids in their home promotes a sense of normalcy for kids during divorce or if kids are better able to adapt to a new normal in a new home. The factors are highly variable for each family based on the age of the children and the parents’ situation; but, they warrant serious consideration. For example, if your sale results in your children leaving their neighborhood friends and transferring to a new school mid-year, it might be best to wait until Spring to put the property on the market. Knowledge about your pending divorce could invite lowball offers. And, these days, the source of that information is no longer limited to nosy neighbors. Even out-of-town buyers may be savvy about searching out telltale signs of a potential divorce sale bargain (e.g., missing clothes in the closet, sparse furnishings) and scouring social media posts and public filings before making an offer. Rather than subjecting yourself and your home to a public viewing, a platform like HomeLight’s Simple Sale can provide a fast cash offer that keeps your situation private. Since your house is likely to be your most valuable asset. Before you put it on the market during a divorce, it’s important to have a clear understanding of what happens to the proceeds after the sale. For example, a divorcing couple could sell their home for $400,000 and put $300,000 of proceeds in a non-interest-bearing account. “But, if the couple begins to argue, then it’s all gone to attorney fees,” Bremer says. “So, sometimes, it’s better to sell your house once those things are done.” Learn more: 6 Timeless Tips From Real Estate Agents Specializing in Divorce Resentment, anger, bitterness, and vengeance are the four horsemen of home sale sabotage. So, if your spouse exhibits those indicators early in the process, it may be better to wait until after the divorce is finalized to sell the house. The de-escalation of emotion and intensity is also likely to help you make smart financial decisions based on what will benefit you as opposed to what will hurt your ex. Assuming your mortgage payments are made on time and the house is well maintained, waiting to sell typically decreases your debt and increases your equity. Even though the housing market occasionally tumbles, overall home values tend to rise over time. Typically, the longer you wait to sell, the more money you’re likely to get out of the home. U.S. Census Bureau data shows 26% of women and 23% of men moved into a new home the same year they got divorced. If your divorce situation — or a fast sale — dictates the need to vacate your home quickly, you may be forced to relocate temporarily to any place that’s affordable, available, and allowable (within the geographic bounds of your custody agreement). Later, you’ll end up spending additional time, money, and effort for a second move to a permanent residence. Nationwide, the average cost of a move less than 100 miles away is $1,400, with a range from $800 to $2,500. For long-distance moves, that expense increases to $2,200 to $5,700. Having more time to decide where to go and how to get there can be cost-effective and provide some sense of calm and control over your situation. Determining the best living arrangement for children and other family members depends on a variety of factors. And, it can take time to develop a plan that accommodates each generation’s needs. While children remain a top priority, approximately 60 million adults live in multi-generational homes. The sale of the family home might cause your live-in grandma to get concerned about how she’ll make neighborhood bridge games or coffee klatsch. Your law-student son might need to adjust his plans to find a clerkship closer to a new home in another part of town. Sometimes, giving children, other adults — and yourself — the luxury of time allows them to adjust to each change individually instead of being bombarded with many transitions all at once. Since divorce and moving are stressful, doing both at one time may seem overwhelming. Once you’ve adjusted to a new life and routine, you may be better able to focus on the sale of your home. Studies on how long it takes to get over a divorce have yielded inconclusive answers ranging from 18 months to half the number of years the couple spent together. The bottom line is: It takes some time to recover from the end of a relationship with your spouse, and maybe even your house, too. If you wait until after the divorce is final and you have some certainty about your future, you may find it’s easier to let the house go on your terms and timeline. Learn more: Do I Need a Real Estate Divorce Specialist to Sell My Home? Unless the divorce decree forces the home sale during the proceedings, you’re still married to your mortgage even after you’re no longer married to your ex. Just as the shared home is an asset, the mortgage remains a shared debt. If you both remain co-owners of the house after the divorce, you’re still responsible for paying the mortgage, utility expenses, maintenance, unexpected repairs, etc. Co-ownership also has tax implications because you have to split property tax and mortgage interest tax credits. Furthermore, the mortgage payments for the shared home are likely to limit the amount banks are willing to loan you to purchase a new home. You can only exclude home equity income from the capital gains tax if the house has been your primary residence for at least two years of the five years prior to the sale. So if you’re the spouse who moves out — and the house doesn’t sell for several years — you may wind up paying capital gains on the equity. To avoid that scenario, some divorce decrees include provisions that preserve that exemption for the sale of the home after the settlement. However, the greatest risk for inadvertently accruing an enormous capital gains tax comes from retaining a pricey property — either through a spousal buyout, refinancing, or trading rights to other marital assets — and later selling for a large profit. Typically, as the sole owner of the home, you can exclude up to $250,000 from the capital gains tax — instead of that $500,000 you could have excluded if you’d sold the home during your marriage. Some divorcing couples opt to sell the house immediately and split the proceeds for a quick resolution because neither party wants to live in the marital home. However, after a vicious custody battle or property dispute, your ex may be hostile enough to obstruct the sale. More than being simply time-consuming and frustrating, the bickering among sellers can scuttle a sale. In the best-case scenario, “An experienced Realtor can communicate productively and establish expectations with both parties; make sure we compromise occurs when necessary; sell the home quickly for the most dollars; and, promote the correct distribution of funds after the sale,” explains Bremer. Conversely, in the worst of cases, “We have somebody who’s occupying the house, won’t respond to our communication, bars anyone from entering the home, and [trashes] the property so that people don’t want to buy the house,” Bremer says. If you wait to sell the home until after the divorce, your home’s value may be higher or lower than it was when assets are tallied. For example, if you get a divorce in March, you are likely to benefit from the high peak of the spring market and receive a top-dollar offer. However, if your spouse won’t consent to sell the home until November, “By then, the interest rates could change; the value might decrease; and, there could be fewer people buying,” says Bremer. In these situations, it pays to work with an experienced Realtor. “We need to consider how much money you’d net if you were to sell it today, and then estimate what you might get if you waited another year or so to sell,” says Fore. Input your property address into HomeLight’s free Home Value Estimator to receive a preliminary estimate of your home’s current value. If the home is put up for sale after the divorce, one spouse — particularly the person who lives in the home or retains ownership — is left with the lion’s share of responsibility. For example: Maybe a divorce decree allowed one spouse to live in the home for a year; but, now, it’s time for the house to be sold. The occupying spouse alone must choose a Realtor, make repairs, prepare the home for showings, and negotiate with buyers. Ultimately, it may take longer to sell the house. “It’s a very one-sided arrangement that makes it easy for the non-involved spouse to blame the ex and second guess decisions,” explains Bremer. “That’s why I don’t necessarily think it’s a great idea to sell after a divorce,” she asserts. “Unless the person who is selling the property gets most of those proceeds.” Learn more: 18 Questions to Ask Yourself Before Selling a House in a Divorce Bremer’s most important advice to divorcing couples selling a home? “Animosity will affect the bottom line of the sale of the home,” she explains. “Taking the emotion out of the sale of the home will generate the highest dollar.” Making the most of your home equity is simple. Bremer says, “Figure out how you can best communicate with each other, hire an experienced divorce Realtor, and really educate yourself on every step of the process.” Finding an agent who specializes in working with divorced or divorcing clients has never been easier. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs. Simply answer a few questions on HomeLight’s Agent Match platform, and we’ll recommend the top expert agents in your area within minutes. Learn more on HomeLight’s resource page: Real Estate and Divorce Source: (Jose Soriano/ Unsplash)Benefits of selling a house before a divorce
Alleviate mortgage debt and home expenses
Cash out equity to fund your new future
Let go of physical and emotional ties to the home and marriage
Increase the chances of paying less (or avoiding) capital gains taxes
Move past the division of one of your biggest marital assets
Optimize your negotiating power
Drawbacks of selling a house before a divorce
Possible delay of the divorce
Potential for your spouse to use the house as a pawn in the settlement
Further disruption to your children and destabilization of your family
Possibility of lowball offers
Uncertainty about who receives the proceeds
Benefits of waiting to sell a home after a divorce
More time to improve communications with your ex
Increase your home equity
More time to create a relocation plan
More time for your kids and other family members to adjust
Potential to make a less emotional, more business-based decision
An experienced Realtor can communicate productively and establish expectations with both parties; make sure we compromise occurs when necessary; sell the home quickly for the most dollars; and, promote the correct distribution of funds after the sale.
Drawbacks of waiting to sell a home after a divorce
Holding your house keeps you tied to your mortgage and your ex
The potential of paying a hefty capital gains tax
If negotiations turn contentious, your ex could sabotage the sale
Potential for a delay in receiving your share of proceeds
You may need to handle the preparations and sale alone
The best advice for a divorcing couple selling a house
