Selling house during divorce: What happens and how to make it a peaceful process

Divorcees discussing real estate

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Going through a divorce is one of the most stressful times in a person’s life. Not only is it an emotionally exhausting experience, but there are also legal and financial matters you need to sort out before the process is over. One of the most pressing considerations to make during this is real estate.

Aside from holding sentimental value, the home is the biggest asset for most couples. That’s why ownership can become a complicated subject. In New York, assets undergo equitable division, which means they’re not easy to split evenly between the couple. 

Because of this and many other reasons, selling your home during divorce becomes the go-to route.

If you’re thinking of selling the house during the divorce, read on to learn about the process.

Selling your marital home is just one option

The question “who gets the house” during divorce is tricky. However, there are a few options that you could research instead: 

1. Divide large assets

This might be the easiest option out of the four. If both spouses have multiple shared assets, they only need to divide them among themselves. 

The only concern is making sure that one spouse gets the same value as the other spouse. Deciding that one spouse gets the house may not be a big deal if there are assets of the same value that the other spouse can get. This could be a valuable art collection, a vacation home, or even a stock portfolio.

2. Buy out the property

In cases when couples can’t divide assets or sell the home, one spouse can “buy out” the other. The cost is usually a bit more or less than the home’s market value, and the final amount to be paid is typically impacted by factors like financial contribution, current market value, and income of each party. 

Of course, the buyer will need to consider if they can secure financing for this during the divorce proceeding.

3. Co-own the home

Co-owning the property is a good option if the two of you don’t want to sell the house for personal reasons but neither of you can buy it out. It’s also a good option to consider if you have children or other dependents who need to stay home. 

Still, this will keep you financially tethered to your ex-spouse after the divorce, which can be uncomfortable, and the Home Sale Tax Exclusion cannot be claimed during a sale if one owner hasn’t lived in the house for the last two years.

4. Sell it

Selling the house during a divorce can become the best option if the other three aren’t ideal. 

Your divorce attorney will likely recommend this because it is a relatively easier legal process, but there are other things that make it an advantageous route.

Why selling may be necessary

Here are a few reasons why selling the house during a divorce is where the two parties agree most often.

Avoid going to court

Whether it’s for legal or sentimental reasons, both parties may want to keep the home. While both are entitled to it since you’ve both been paying financial obligations throughout your marriage, if you can’t agree on who should get it, the court will decide for you.

This legal proceeding will take up more time and resources, and this battle will only widen the rift between you and your partner. Selling the house helps you avoid this scenario, and dividing the equity is easier since there’s a set amount you can get.

Financial difficulty

While you and your spouse were together, you probably split the mortgage, property taxes, bills, and other expenses tied to the property. Whoever gets the house after the divorce will need to pay for all of these bills on their own, without the financial contributions of their former spouse. In most cases, the mortgage or financial upkeep is simply too much for one person to be worth it. That’s why selling the house can be the better option.

The timing for selling is also essential. Married couples don’t have to pay capital gains taxes for up to $500,000 of profit. Single individuals, on the other hand, are only exempt for up to $250,000 and the rest of your profits will be taxed. That’s why the best time to sell a marital home and other marital property is before the divorce is finalized.

Liability risks

Liabilities are another major concern for divorcing couples. The first of these is the mortgage; it’s one thing trying to find the funds to pay for it, but remaining qualified for the loan is a whole other issue. You’ll need to convince your lender that you’d be able to find the funds to keep paying the mortgage on your own, and if you can’t, you could be facing foreclosure.

Because of these three reasons, selling the property is the most practical and sensible option for most divorcing couples.

Steps to take to sell the property

If you’ve decided to sell the house and split the equity, here are the next steps you should take: 

  1. Find an experienced real estate agent. Even the seemingly simplest of transactions can have a curveball at the end of a transaction, so it’s important to have an expert by your side when going into an emotionally, financially, and legally complicated transaction. I always tell my clients “there will be problems, but I will know the answers or I will know someone who does in my sphere of attorneys, appraisers, inspectors, title companies, etc.”
  2. Prepare the home to sell. Your realtor will let you know if you need an inspection. Otherwise, you can get ready by doing minor repair and paint jobs and decluttering the rooms. This will improve the value of your home and make it more appealing to potential buyers. Don’t forget to gather important documents like titles, utility bills, and the latest mortgage payments.
  3. List the property. Before listing a home, I always evaluate whether a home needs professional staging or just some strategic redesigns with your own items. Once staged or redesigned, I’ll have professional photos and video taken to accompany my marketing material on hundreds of websites and platforms to ensure maximum visibility.
  4. Negotiate offers. Negotiating can be a tricky process, but with the help of an expert real estate professional, you can make informed decisions and secure a bid within the fair market value. Be sure to ask questions about the buyer’s financing options, if they want an inspection, or when they want to gain occupancy of the property.
  5. Sign Purchase Agreement contracts. Once the inspection is done, you can sign the agreement contract. The buyer’s lender will likely seek out real estate appraisers during this stage while the real estate attorney begins the title search. There will be a lot of processes happening behind-the-scenes even after you have the written and signed agreement, so you might need to wait up to 45 days before closing.
  6. Sign Closing documents. With the presence of the real estate agents, real estate attorneys, the buyer’s lender, title closer, and other relevant parties, the buyers and the divorcing couple can sign the documents that formally transfer ownership of the marital home.

Making it a peaceful process

A divorce is a tumultuous event, and all of the hard decisions involved can make the split even more emotionally exhausting. To make the negotiations as peaceful as possible, keep in mind the following tips.

Settle and align your goals

Laying the groundwork is essential for the divorcing couple before selling their home. Before putting the property on the market, be sure that both of you are 100% on board with the decision. You’ll also want to agree on a timeline for divorce selling.

In general, the best-case scenario is selling the family home before the divorce is finalized. That way, capital gains taxes won’t be as much of an issue. This is especially important if the property has a significant amount of appreciation but, of course, consult your attorney to find what the best option is for your specific circumstances.

Work with a seasoned real estate agent

Keep the relationship professional. Having a real estate agent at your side is important during difficult divorce proceedings. They’ll help you navigate the entire process; your agent’s advice is critical during this time, so trust their expertise during negotiations. 

Though you’ll be working closely with your agent throughout the process, your agent is not a mediator.

Keep your sights on your future

Marriages don’t always work, and the ensuing fallout can take a large emotional toll. You may feel resentment over the fact that you have to sell your home. 

However, you can always look at the bright side and see the process as something liberating. You can look forward to something new, whether you’re moving to a new city or buying something you’ve always wanted with your new funds.

Contact a dedicated real estate agent

Selling your house during a divorce is one of the most practical options you have during this turbulent time. To make the process easier, work with an experienced real estate agent who is familiar with divorce and real estate transactions.

Author

Cristina Morizio

Long Island real estate agent Cristina Morizo
As an experienced REALTOR® and Long Island native, I know the ins and outs of the real estate market. I help home buyers, sellers, investors and homeowners navigate and negotiate. Questions? Ready to buy or sell? Let’s talk!

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