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Posted over 9 years ago

Selling Your House When You Divorce

Divorce is a very emotionally draining event that unfortunately many individuals have to go through each year. For those who are divorcing and also homeowners, most will decide to sell their home as the result of the divorce. Here are a few practical tips on how to handle this important sale during this stressful time:

1. Deciding on the timing of the sale:  Generally, most couples are better off selling the property while still married simply because a couple is eligible for the $500,000 exclusion on capital gains. Once you are divorced, the capital gain exclusion drops to $250,000 for each person individually. This may not be an issue for most homes, but it is still a valid consideration. Since a sale and preparation for a sale typically takes weeks to months, it is is best to make a decision sooner rather than later. Remember to coordinate with each other on moving dates, and it’s best to confirm in writing so everyone is firmly committed to a window of dates and sticks to them.

2. Picking an Agent: While in general, it’s fine to sell a house without an agent, it’s not recommended when you’re in the middle of a divorce—the added stress is really not necessary. Try not to spend a lot of time arguing about who your agent will be. Furthermore, a real estate professional can be a voice of reason during this emotional time. Couples often have a lot of emotions and memories tied to their home, and these can be exaggerated during a divorce; an independent professional will be better at judging the value and shortcomings of a home. Additionally, a real estate agent knows the real estate market and the values of the homes and sales trend in an area, and can help you set a fair price and market the home.

3. Settling on an asking price: Take the agent’s advice about your asking price—that’s one of the main reasons you’re using an expert instead of selling the house yourself. Turning that decision over to the agent will eliminate one potential conflict. If you think the agent’s opinion is really off-base, you might need a different agent (or a reality check of your own).

4. Dividing the Cash: Finally after the house is sold, you’ll have to figure out how to divide the proceeds. In general, this shouldn’t be too complex—the escrow company can distribute the money after paying off all the obligations on the house and making whatever other payments you’ve agreed to. (For example, you might pay off marital debts with the proceeds of the house sale.) And if one spouse has been making post separation mortgage payments, that spouse has probably been reducing the principal amount and increasing the equity, which may increase the amount to be divided between the spouses after the closing costs and obligations have been paid. The distribution should be adjusted to account for the paying spouse’s contribution.



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