Selling Your Home In Divorce
Selling your Plano house during a divorce isn’t just a transaction. It’s a life-altering event.
You’re not only dealing with property. You’re also facing a whirlwind of emotions and major decisions. Decisions that will profoundly impact your future, your family’s well-being, and your finances. This can feel overwhelming.
Which is why I want to help.
I have close to three decades of experience in the real estate industry.
And I’ve shared clear, practical advice and strategies with many sellers just like you to help them understand the process of selling property before a divorce settlement.
The goal?
For you to be able to make informed decisions that lead to a successful sale so you can transition to the next chapter of your life.
Here’s everything you need to know about selling a house during a divorce.
What to know before selling your [maket_city] house during a divorce
There are a few things every divorcing couple needs to understand before listing a home for sale.
Because being armed with the right information will help you and your spouse with important decisions.
And it can help secure the best outcome for your sale.
Here’s what you need to know before selling your house when getting divorced.
Texas is a community property state
Generally, assets acquired during marriage in a community property state are split 50/50 (unless a prenup states otherwise).
Knowing this about your assets is essential before selling your Plano home in a divorce because it can:
- Help you and your spouse’s financial planning as you move forward
- Guide your strategy when negotiating a divorce settlement
The court can order the sale of a home
Can’t agree with your spouse on selling the house?
The court might intervene.
This is called a forced sale or partition sale.
It usually happens when divorcing couples have a property dispute or can’t agree on how to sell.
The court will also decide how to divide the proceeds in these instances.
This can be a major hassle and prolong the divorce process.
That’s why being aware of the possibility of a court-ordered sale is vital before selling in a divorce.
It can incentivize both parties to negotiate and reach an agreement.
This usually leads to a faster, more cost-effective, less contentious resolution.
Agent referrals from an attorney are usually biased
Some sellers get a referral for a real estate agent from their divorce attorney. But be careful… This is usually a “scratch my back, and I’ll scratch yours” arrangement. Meaning that the agent and attorney refer clients to each other.
Why does this matter?
Because a listing agent recommended by a divorce attorney might not be the best choice.
Here’s why…
The realtor might prioritize maintaining their relationship with the legal professional over your best interests. Especially if they’re trying to secure future referral business. You want to avoid these types of real estate agents at all costs.
Should a prospective real estate agent have experience in divorce situations? Yes. But other qualifications are equally important.
(We’ll elaborate on this in a bit…)
Options for selling a home amidst a divorce
Couples facing divorce have several options for handling the sale of their property.
You can mutually decide with your spouse on the best solution.
Or a judge may intervene if you can’t reach an agreement.
Here are the three main options for selling a house during a divorce.
One spouse buys out the other
One approach for selling in a divorce is for one spouse to buy out the other’s share of the property.
This might be ideal if children are involved because you avoid having to uproot them from their home.
It can also make sense if one partner prefers to keep the house.
Here’s how a marital buyout works…
A buyout price is typically negotiated after:
- Assessing the home’s fair market value
- Factoring in any mortgage balances and/or home equity lines of credit
- Determining the equity interest of the other spouse.
The spouse keeping the home in the divorce settlement has to then fund the buyout.
This is typically done by:
- Giving the other spouse a lump sum: This means that they must have enough saved cash or liquid assets that can be sold.
- A cash out refinance or taking out a second mortgage: This means that they would need to qualify for the new loan based on a single income.
In the case of a refinance or taking out a second mortgage, the partner initiating the buyout needs to be able to afford the new monthly payment, real estate taxes, and any upkeep on their own.
Once the new loan is signed, the selling spouse will receive their proceeds, sign over their ownership rights, and officially move out.
But what if this financial situation isn’t feasible?
That leads to the next option…
The house is sold after one partner keeps it for a specified time
Divorcing couples can remain co-owners for a set period before they sell the house.
This might be a good option for parents who aren’t able to afford a buyout.
Here’s how it works…
Both spouses continue owning the home.
But one partner lives there and maintains the property.
The spouse who occupies the home usually pays the entire monthly mortgage and taxes.
This type of co-ownership typically lasts until a certain milestone, like the couple’s youngest child turning 18.
The key is ensuring that the spouse living in the home can financially manage this commitment.
Because there’s a catch…
Both parties remain financially tied to one another until the house is sold.
So both spouses’ credit scores are impacted by any late mortgage payments.
Or if there’s a foreclosure.
Immediately sell the house and divide the equity between spouses
Most couples decide to sell the home outright and split the equity during a divorce.
That’s because this solution is typically the most simple and straightforward.
Especially when neither spouse can afford the home on their own.
But this approach also has another major benefit…
It allows both spouses to access the funds necessary for a fresh start.
And while finances are certainly important in a divorce…
Being able to move on to the next chapter of life can be priceless.
Is it better to sell a house before or after a divorce?
It’s better to sell a house after a divorce agreement is in place but before the divorce is final.
This approach has a greater chance of giving you and your spouse an emotional and financial advantage.
Of course, every selling situation is different –– so you should consider your circumstances.
But in my opinion, this is the best route to take for couples selling a home because of a divorce.
Here’s why…
Benefits of selling post-divorce agreement and prior to officially divorcing
Avoid (or minimize) capital gains tax
Selling a house after a divorce agreement but before it’s finalized can offer a significant capital gains tax advantage.
Capital gains tax is paid on the profit from a sale.
It can be calculated by subtracting a home’s purchase price, closing costs, and improvements from its selling price.
Married couples only pay this tax on any profit that exceeds $500,000.
But this figure plummets to $250,000 for singles.
So selling while still legally married can result in substantial tax savings.
Especially if you have considerable equity in your home.
On the other hand…
These tax implications can change drastically once a divorce is finalized.
Because if one spouse gets the house…
Then the other will lose out on a substantial tax benefit.
Put the emotional ties in the past
Sometimes selling a house after a divorce is the only option.
But waiting to list the property can complicate things.
For example…
Say you and your ex are still both responsible for the mortgage.
But coordinating payments each month becomes a nightmare.
Or you’re ready to buy a new home (and move on).
But you still have to make decisions about selling the house with your former spouse.
And it reopens emotional wounds every time you do.
Whereas selling before finalizing the divorce can simplify the emotional process.
How?
Because it helps both parties start fresh with fewer complications.
Which can provide the emotional closure needed to move on.
Reduce the chances of disagreements with your spouse
Selling after you’ve agreed on terms with your spouse but before the divorce is official helps pave the way for a smoother, less stressful sale.
How?
Because you have a formal agreement in place.
One that clearly outlines expectations and each party’s responsibilities.
Things like living arrangements and who prepares the house for sale to a cash buyer like the Genuine House Buyer.
Whereas selling without a formal structure can leave a lot for interpretation.
This can be a breeding ground for disagreements.