In any divorce case, dealing with the partition of property is a crucial issue. Legally speaking, selecting what should be done with a family house might create a variety of difficulties.
Each state has radically varied regulations regarding property and divorce, which makes it challenging to sell a home in a divorce situation.
In your situation, you should first ascertain whether your state follows community property rules.
If so, you and the other party might be required to split the marital residence equally. This only applies to assets gathered during the marriage, though. To ascertain the value of the house and to determine how, if at all, it should be divided, you might need to get a judgment order.
In a Divorce, Who Receives the House?
One of the following three scenarios characterizes the majority of property-related divorces:
- The residence is kept, and one of the spouses buys out the other’s legal interest.
- For a predetermined period (usually until the youngest kid becomes 18), the home is used and occupied by one spouse. After that point, the house may be put up for sale.
- Any equity is divided after the home is sold right away.
It can be challenging to manage because the outcome of each divorce determines who receives the house. Depending on how amicable or contentious the divorce was, any of the aforementioned situations could take different turns. The future of a house can be negotiated, but there are a few possibilities to take into account.
Assets
If you and your spouse have several substantial assets that are jointly owned, such as a principal residence and a vacation property, you might merely decide to divide the assets. By doing this, you each acquire ownership of assets that are roughly equal in value.
Since you won’t have to wait for a property sale or put up with a protracted discussion about who gets the bigger portion of a home, dividing up major assets might hasten the divorce process. You won’t have to deal with the stress of selling a home while going through a divorce, but you will still need to negotiate the value of each big asset to reach an equitable agreement.
Paying Off the Opposing Party
Either of you can buy out your partner if neither of you wants to sell. Depending on each party’s income, financial contributions to the property, and the home’s earning potential, and the buyout may be for more or less than half the market value.
You can offer to accept half of the home’s market worth if you don’t want a heated argument.
Remember that the individual buying out must have access to sufficient funds that aren’t affected by the rest of the divorce proceedings and be able to pay the mortgage on a single salary.
However, you can sometimes combine a buyout with a bigger house refinance.
Joint Ownership
A couple can agree to a co-ownership plan in a friendly divorce. In this scenario, you will determine how the mortgage payments will be divided, when they will be made each month, and how the sale proceeds, should one occur in the future, will be allocated.
In this manner, kids can stay in the house without anyone worrying about shelling out a fortune to buy out the other parent.
You are still financially dependent on your ex-spouse in this situation. Late payments on a co-owned home will impact both people’s credit ratings, even if you’re divorced.
Additionally, a homeowner who has sold their property but has not lived there as their principal residence for at least two of the prior five years cannot use the home sale tax exemption.
If they decide to sell, they will be responsible for paying the full capital gains taxes on any appreciation. This could be a problem unless you can agree on a selling schedule that will give both owners the tax exclusion.
Questions to Ask Yourself Before Selling Your Divorced Home
The “characterization” of the property is one of the key factors to consider when selling a house in the context of a divorce, as was already indicated.
This refers to whether the property is owned separately by one spouse or jointly by the married couple under community property rules (for example, the house was given only to one spouse before marriage).
Again, the sale earnings will be split equally between the parties if the house is classified as community or marital property.
Other things to think about when selling a house during a divorce include the following:
- Whether the house has any unpaid bills, such as mortgage debt, back taxes, or maintenance obligations
- Whether one spouse made any substantial property renovations (these may be regarded as separate property based on the motivations for the improvements);
- Whether there are any controversies or ambiguities surrounding the home’s advertised price;
- Whether you believe the other party has hidden any additional assets or property
The couple’s children and whether the house sale might impact them are two more crucial factors to consider. If selling the house is not in the children’s best interests, it may not always be a choice (for example, if a child has unique needs and relocating would be difficult for them).
Why it Could Be Important to Sell Your Home During a Divorce
Although selling your home after a divorce is not required, doing so may be preferable for various reasons. For various reasons, selling during a divorce may be the best option despite the stress and hassles.
Economic Factors
You might have had two salaries to meet the costs when you bought the house together. Selling the home can be the best action if either person cannot pay the mortgage, insurance, property taxes, and maintenance on a single salary.
The Home Sale Tax Exclusion states that married individuals who sell their primary residence are exempt from paying capital gains taxes on profits up to $500,000 in value.
The capital gains tax exclusions are reduced to $250,000 for single people.
You must have used your home as your principal residence for two out of the last five years to qualify for the exception. It might be more financially advantageous for both parties to sell the house before the divorce is finalized if one person hasn’t or won’t live there because you can write off a bigger profit.
You do not need to still be married to qualify for this tax deduction, regardless of whether you file a joint tax return or a separate one. Selling the house before filing for divorce has significant financial benefits.
Legal Grounds
Even if it wasn’t a 50/50 split, most of the time, each person contributed toward the house’s cost. If both of you want the house but cannot agree on who should inherit it outside of court, the courts will decide for you.
Do I Need an Attorney?
It can frequently be difficult to sell a house after a divorce. If selling your home might be a part of your divorce plans, you might want to speak with an experienced real estate attorney. Any elements that might be problematic when selling the house can be found with the assistance of your lawyer.
Your lawyer can also assist you if you have any general inquiries about the division of property.
