If you are going through a divorce, you probably have a lot on your plate already. Dividing your marital home, which is usually the biggest asset of a married couple, further complicates the situation. To ease some of your burdens, we’ve gathered essential information you should know when selling a house during a divorce. Hopefully, this will help to make the divorce agreement easier for you.
Who Usually Gets the House in a Divorce?
When a divorce ensues, there is one of three scenarios that typically occur:
- One spouse stays in the house together with the children. Once the youngest offspring turns 18 years old, the house can then be sold.
- One spouse gets sole ownership by buying out the home from the other spouse.
- The house gets sold and the proceeds are split between the spouses.
In the first circumstance, both spouses may decide that one of them should stay in the marital house together with the children. For the sake of not disrupting their children’s lives more than necessary, one of the spouses will take the responsibility of raising the kids in their home.
Going through the divorce process and not living with both parents is heartbreaking enough. Uprooting the kids from the place they grew up in would bring additional stress, which could lead to trauma in their adult life. To avoid this, the spouses can agree to keep the house until the children are all grown up. Delaying selling the house in a divorce is a better choice in this instance. Once the marital assets are sold, the cash is divided between the divorced spouse.
In the second option, one spouse gets sole ownership of the property. If one spouse wants to keep the house and the other is willing to let go, the former can buy out all legal rights from the latter. When this happens, the buying spouse should be financially capable of shouldering the mortgage payments on a single income.
The last scenario is a more common option for couples. Selling your marital home and dividing the profits solves the problem swiftly. Let’s talk more about why selling a house after divorce agreement is the best viable option in the next section.
Reasons Why Selling Your House Is Necessary During a Divorce
There are times when neither of the spouses can afford to pay the mortgage on a single income. Lenders are usually unwilling to back up a single owner, which can lead to the foreclosure of the house. In this instance, selling the house is a practical choice.
You can also take advantage of the Home Sale Tax Exclusion. About $250,000 (if you are single) and $500,000 (if you are married) of the sales profit will be free of tax. The only requirement is for you to have used your house as your primary residence for 2 years in the past 5 years. It makes more financial sense to sell the house while you are both still eligible for the capital gains tax exemption.
When both parties want to gain possession of the house and will not concede, then it is up to the courts to decide who gets to keep it. A legal battle will always end up souring the already strained relationship between the spouses. A sale of the house will settle the matter before it escalates.
The heavier reason couples decide to let go of their home is emotional. The happy memories you’ve made with your spouse, children, and pets will forever haunt your marital home. The person who is left living there will constantly be reminded of what they have lost.
Steps on Selling the House During a Divorce
- Have it appraised
The first step is to have your property inspected and appraised. This will give you and your spouse an idea of how much you can sell your home for.
- Get repairs done
Based on the appraisal and inspection of a professional, they will tell you what repairs and upgrades you can do to increase the market value of your property.
- Hire a trusted real estate agent
Get a realtor that you can both trust. This person will be handling all real estate transactions on both of your behalf, so it is good to have someone who has both of your interests at heart.
- Set the asking price
Since you already know the market value of your property, the next step is to settle on a selling price that both spouses agree on. This will ensure that both parties will be satisfied after the sale.
- Prepare for property visits
As is the custom, an open house or virtual tour will be set by your realtor. Your property will be on display for potential buyers to look at. Make sure you have finished the repairs and made the house aesthetically appealing beforehand. Make it easy for the visitors to picture themselves living there.
- Look over the offers
Offers for your property will come. Never settle for anything less than your asking price. Remember, you have a lot of overhead expenses, such as repair costs, capital gains tax, property taxes, and professional fees, on top of the split of profit with your spouse. Only consider offers that will make both of you satisfied.
- Agree on the distribution of profit
Under community property law, anything purchased during the marriage entitles both spouses to equal ownership. This means that all proceeds from the sale of marital property after a divorce would also be divided equally between them.
In the states without the community property law, if one spouse contributed more in paying for the financial upkeep of the property, then they will be awarded a larger sum from the real estate sale. In some cases, if the larger contributor also owns more assets, a bigger portion of the profit will be given to the spouse with fewer assets.
Letting the court decide on the divorce settlements usually leaves one party dissatisfied. So, to make matters a little less messy, you and your spouse should come to an equitable distribution of assets and profits before taking it to court.
Letting go of your marital house is a major event during a divorce. It is the ultimate manifestation of your separation from your spouse. It can be difficult for both of you. But it doesn’t necessarily have to be complicated. Let HouseMax help solve it for you hassle-free.