Nobody likes to talk about divorce. It’s just generally unpleasant, and it can be difficult to even broach the topic in conversation. Complicating matters is how to split the assets, and a house tops the list of “Difficult to Share or Split.” The best option is usually to sell it, so how do you decide when to sell your home because of divorce?
Why to Sell Your Home in a Divorce
This option makes splitting things simple. First of all, it turns the house into an amount of money, which is much more easily divided. We can all agree that it is easier to find ways to parse out portions of $300k than it is to do so with a 3 bed/2 bath domicile.
It also removes much of the emotion from the negotiations. You are no longer deciding who gets to “keep the house” and all of its memories. Instead, you are just deciding on a number, which is easier for everyone.
Selling the home prevents one party from being in the awkward position of trying to afford a large mortgage on a smaller income. And it means that everyone can make a fresh start post-divorce.
But when do you sell? There are basically three options: before, during, or after.
Sell Your Home Before the Divorce Begins
From a strictly financial aspect, the before option is a good choice.
It helps to avoid or minimize the capital gains aspects of the sale. Since two people are involved, your tax liability is smaller than if only one person sells the home.
Selling before the divorce process begins can make starting a new life a bit easier. The money can be set aside for each party to help pay for legal fees, new housing, new furnishings, and eliminating any pitfalls (such as already accrued debt) you may encounter.
Starting over is hard no matter what. But selling the house together and early can jumpstart the process and help you prepare for the road ahead.
One drawback is getting both parties on board for this. In a way, it is an acceptance of the coming end, so some may be hesitant of selling before filing.
Also, if children are involved, you might hope to keep more stability by staying in the same house. In that case, it is often best for one party to take over the mortgage.
Sell Your Home During the Divorce Process
Bills and debt can easily stack up during a divorce. There are additional housing, heating, electricity, water, and food costs. Not to mention the lawyers. They can be costly and build up expenses quickly.
One way to mitigate these costs is to sell the home jointly during the divorce proceedings.
First of all, both parties get something they may desperately need: financial relief. Legal costs build up quickly and may not be completely anticipated, so turning a house into cash can help keep both parties afloat. Especially with lengthy suits, that require even more money on hand.
In this case, you can still get the tax advantages mentioned before if you file jointly. But now that divorce proceedings are underway, you might feel more confident that selling the house is the way to go.
Sell Your Home After the Divorce Is Finalized
People want to wait to sell until after the divorce is finalized for multiple reasons.
Often, it is the most valuable asset, and it can play a key role in negotiations. Perhaps the home is conveniently located, and one party doesn’t want the hassle of moving while trying to get everything else in line.
When children are involved, it can be difficult to uproot them, particularly in the middle of a school year. You might prefer to give them more of a transition period.
Also, the house could need important repairs before putting it on the market.
Sometimes it is best to separate the divorce process from the home selling. You might not be able to wait to have the divorce finalized, but that doesn’t mean everything has to happen at once.
Keep in mind that selling the home after the divorce is final could result in a heftier tax burden. Since only one party is selling, the capital gains taxes only apply to one person, leaving less to work with. Also, you must file separately at this point as neither party is married to the other anymore.
Divorce is a difficult transition. It can be taxing, both emotionally and financially, and splitting up possessions drags the process out. Figuring out what to do with a house can remove much of the pressure.
A sale can free up cash and help both parties find a new place in life. And since one party will likely be moving out anyway, selling can leave both parties feeling equal in the separation.
I’m sorry if you’re dealing with a divorce. It is a tough road. But if you’re struggling to know what to do with your house and how to get it sold during a divorce, please contact the Jablon Team.
Marc Jablon, the Jablon Team