On average, Americans have $274,000 of wealth tied up in their homes. So you’d think that couples who once bought a house together would preserve what’s likely their biggest asset with care, no matter how heated things get. But divorced couples are often confused about how to handle the house they once bought together, which can result in serious financial consequences.
“I sell a couple of hundred homes a year that are foreclosed properties for banks and government, and a huge chunk of those are as a result of a divorce,” says Tim Ray, a top agent in Kansas City, Missouri who regularly helps divorcing couples sell their home. “People just throw their hands up because they don’t know how to deal with their situation.”
Rather than treat your largest financial asset with reckless abandon, review these top considerations for navigating your divorce settlement options related to the house that we’ve compiled with the help of real estate attorneys and legal experts in family law.
Find an Agent Experienced in Divorce Sales
A great real estate agent can help you navigate the complexities of selling a home in a divorce and lighten your load. HomeLight can connect you with a Certified Divorce Real Estate Expert in your area or a top agent with valuable experience helping couples successfully sell their homes due to divorce.
What is a divorce settlement, and how does property factor in?
A divorce settlement is a legal document between a divorcing couple that formally outlines the terms of the divorce regarding child custody, alimony, property division, and more. Even in the most civil of divorce proceedings, you’ll need to have a formal divorce settlement prepared.
While no two divorces are the same, creating a settlement typically follows a standard timeline:
File a complaint, kick off the divorce proceedings. Either you or your spouse writes up a petition, or complaint, with a lawyer. The petition explains why you want a divorce, as well as how you want to divide assets.
Complaint is served and answered. The petition is filed in court, as well as formally served to your spouse. Your spouse is required to answer the complaint with a response, which typically includes how your spouse would prefer to divide the assets.
Exchange of information. You and your spouse exchange information around finances, property, and income.
Mediation and settlement. Some states legally require divorcing couples to enter mediation discussion. In other states, mediation is voluntary. If you and your spouse can agree on all assets, you’ll share a settlement agreement with the court.
Approval or trial. If the judge agrees with the settlement agreement, a formal divorce decree is drawn up. If you and your spouse can’t come to an agreement, the divorce will go to trial.
If you and your spouse (soon to be ex-spouse) own property together, deciding what you do with it in your settlement is one of the bigger and more complex challenges you’ll face. You’ll want to make an informed choice based on your finances, your relationship with your ex, real estate market conditions, and the impact on your children. Most divorced couples will choose between these options:
Sell the house and split the proceeds. You both might decide to move on immediately and sell your home. From there, you’ll make a legal decision to divide up the earnings equitably upon closing.
Buy out. Perhaps one of you wants to stay in the home, while the other leaves. Instead of selling, one partner can buy out the other’s interest in the house. This commonly happens in instances where children are living at home, or the market conditions aren’t ideal for a sale at the time.
Keep the house and sell at a later time. In a booming rental market, you and your ex might decide to hold onto your home and rent it out. Alternatively, you might decide on an alternative living arrangement where you keep the property jointly post-divorce and wait for the right time to move forward with a sale.
