When going through a divorce, assets are divided which means decisions need to be made about property ownership. Even in a split that is relatively peaceful, it can be complicated when deciding whether to sell your home, keep it as a dual investment, or have one party buy out the other. Selling is already complex, as it is usually the largest asset held, but adding in the emotional component when splitting with a spouse means having a neutral party help expertly navigate the real estate transaction portion is essential. Here are some important factors to understand when selling a home during a divorce.
What Happens to the House in a Divorce?
There are a few standard options when it comes to the marital home during a divorce. If there are kids and one of the parents can afford to, they can buy out their ex and keep their kids in the home. The home may be kept by both parties and one of the parties will keep use and occupancy of the home for an agreed-upon period of time, in many cases until the youngest turns 18 or leaves for college. Otherwise, both parties go separate ways, and the home is sold at the time of the divorce. There are options that amicable parties can work through.
While Going Through a Divorce, When is the Best Time to Sell?
In order for both parties to take advantage of the capital gains exemption they both have to have lived in the home two of the last five years. If a home is sold, a married couple is exempt from paying federal capital gains on the first $500,000 of profit from the sale, single party exclusion is half of that at $250,000 for each. For example, if a home is purchased for $400,000 and is sold around ten years later for $950,000, the sale yields over $500,000 profit. Prior to splitting the profit, at which point capital gains taxes may apply, the mortgage must be paid off as well as any equity lines, broker fees, and other closing costs must be paid off.
Hiring the Right Real Estate Professionals to Sell your Home
The decision has been made to sell the home. Regardless of whether this is happening before or after the divorce is final, the first step is to hire a professional REALTOR® who is preferably well-versed in navigating the complexities of a home sale during a divorce. Furthermore, it is much less emotionally taxing to hire a REALTOR® who will serve as a neutral party to the couple throughout the transaction. If one party has a long-standing relationship with an agent, the other party may feel that favoritism is at play. Ask that agent to refer you to a trusted REALTOR®, likely within their brokerage, to handle this transaction to mitigate any of those concerns.
The Home Selling Process During a Divorce
REALTORS® are trained to negotiate, communicate with pertinent parties, and handle private matters such as finances and divorce details. Taking this complex process off the hands of the divorcing couple is immensely important and much more financially beneficial that trying to sell by owner. Once an agent is hired, all parties will have to agree upon the mortgage broker, the list price, a showing and open house schedule, and as well as the terms and timeline of the sale.
Depending on which state the home is located in, it may be required to have a real estate attorney, but no matter where the couple resides, it could be beneficial to consult with one regardless during a divorce, as the legalities are more complex.
The divorce settlement may include the implications of the profit share of the primary home, and of any other joint-owned properties such as investments and 2nd homes.
Standard selling practices come into play and the home should be decluttered, and all personal effects should be removed such as kids’ art, family photos, and the furniture should be staged in a way that gives every room a clear purpose.
Closing the Sale: Embracing a New Chapter After Divorce
After the offers come in, both parties and their REALTOR® will need to evaluate them and pick the best one suited to their financial needs and terms. This can be difficult and emotional and though it’s hard, should be handled objectively. After closing, the profits of the sale will be divided according to the divorce settlement or in the agreed-upon manner if done before the divorce is final.
Whatever the reason, selling your home can be emotional and intimidating at times and compiling that with a divorce can be even more stressful. Make sure you have the right REALTOR® looking out for both of your best interests, as this will help ensure the smoothest transaction and transition out of the home.
If a life change such as a divorce is driving the need to sell your home, contact me today! There is no obligation at all, and getting your questions answered during a challenging time can be very helpful. We wish you the best of luck during this time of change and as you embark on your new beginning.