Going through a divorce is a process that can be emotional and financially-draining. In the United States, the divorce rate has steadily declined in the recent past, but probably because the marriage rate has also reduced.
During a divorce, the involved parties have to decide what to do with the property they own. The procedure of the division of property can be complicated. The law recognizes that there must be consent for disposal or the marital home during a divorce.
While one party might want to keep the home by buying the other spouse out, the other party might want to have the house sold. At other times, both might want to remain in the ownership of the home. In such a case, the divorcing couple may decide to sell off their home and share the proceeds.
How does selling a house work during a divorce? Read along to understand the basic concepts concerning the division of property, ownership, and tax liability.
Establishing ownership of the house is the first step towards deciding whether to sell or not. If both parties have lived in it for more than two years, the ownership is determined by the state. Common Law dictates that a property purchased in an individual’s name remains their sole property.
Some states honor the common law standards but impose a few caveats. An example is if the other spouse has lived in the house for some years and has contributed to its active appreciation. They are entitled to retain some profit from the sale of the home.
States like Washington and California observe the community property standards. The law states that property acquired within the marital union belongs to both parties regardless of the name on the ownership document. This applies to debts and income.
The only case in which couples can transcend this policy is if there was a postnuptial or prenuptial agreement between them.
The profit you get from the sale of the home should be divided between the two parties depending on the ownership established. The division should, however, take into account the mortgage debt, unpaid property taxes, and the terms of the divorce.
Most commonly, profits are shared equally between the spouses. Some exceptions may arise where one party has invested more in the house. For example, where one party has shouldered the mortgage repayment and related expenses more.
Capital Gains Taxes
There are real estate tax implications that come with the sale of a home. The tax liability is calculated on the gain between the buying and selling price of the house. If a couple is married and is filing jointly, they may exclude up to $500,000 of the profits when filing their taxes.
This condition applies only if the couple has owned the house for at least two years and has lived in it for at least two years preceding the divorce. After the divorce process is complete, tax exclusion is dependent on an individual’s qualification for exclusion.
One of the reasons that many divorcing couples delay the sale of a shared home is the tax implication. It is especially hard if one of the parties does not qualify for a tax exception. If only one part qualifies, only up to $250,000 can be excluded.
Why Do Some Couples Choose to Sell?
Choosing to sell a matrimonial home is a decision that only the couple can make. Nevertheless, there are benefits associated with selling the house during the divorce process. The couple benefits financially and personally.
The profit you get from the sale of the home partner can help each start life over. Selling also eliminates the shared investment and helps provide closure emotionally and legally. If you sell the house before the divorce process is finalized, the parties get financial means with which to meet the financial obligations of the process.
Other couples sell their house because they can no longer afford to maintain it after they have gone their separate ways. Whatever is making you sell should be in the best interest of the interested parties.
Making Preparations to Sell
In trying to answer the question “how does selling a house work during a divorce,” the fact that it may take an emotional toll on the couple cannot be overlooked. Some responsibilities and consequences will come with making the decision.
Some homes may be in need of maintenance services and upgrading before they can be put up for sale. The obligations call for resources like time and money, and some decision-making from both parties. It is crucial to prepare for this discussion, putting priorities in their rightful place.
The divorce attorney also needs to be consulted before making the final decision. If you need a real estate agent in the selling process, it is advisable to share the agent. Having the same person work on your shared goals can make the process easier and faster.
An agreement with your soon-to-be-ex is mandatory to avoid disagreements in future. Some of the pertinent matters to be discussed include:
- Who will cater for the maintenance work if the house requires it before the sale?
- Do you want to sell or will one partner live in the house? What will be the contributions of the non-residing spouse? Will the residing spouse cater to the entire mortgage amount?
- Will one or both partner turn up for the showing of the house or will the agent be responsible for everything?
- How much will be the asking pricing?
- Will you sell before, during, or after the divorce? Selling at each stage has its fair share of advantages and disadvantages.
How Does Selling a House Work When Accepting an Offer?
Deciding how much to ask for the house, and how much to accept, is one decision of the most significant decision the couple will have to make. Discuss the price with your spouse and the real estate agent. If both of you cannot agree on the price, leave it to your agent to get you the best price.
As soon you start getting offers, discuss them with the divorce attorney, your spouse, and the agent. When disagreements arise, let your attorney and agent know to avoid ugly happenings at the end. The attorney and agent are in the picture for such purposes.
Accepting an offer should be mutual, and should be in the presence of the attorney and the real estate agent. Some couples do not have a hard time accepting an offer as long as it has a profit margin.
How to Divide the Profit
Splitting the profit from the sale of the house might be subject to your state laws on property division. In Washington, for example, the property acquired in matrimony is equally owned by the spouses. The house belongs to the both of you regardless of the name on the deed.
Exceptions are if there was a pre or postnuptial agreement that appointed one person as the owner. For the most part, a home is part of shared assets, and hence all of its responsibilities should be split equally.
The splitting of the expenses and profits may vary under different circumstances. A partner who contributed more to the mortgage may be apportioned a more significant part of the proceeds. Alternatively, the spouse getting the larger portion of assets may get a smaller part of the profits.
An attorney plays a crucial role in negotiating how the profit is divided.
How to Handle the Process Amicably
Since selling a house during a divorce can be devastating, you need to make it easier for you by:
- Taking care of you- dealing with the anger, pain, and hurt is not easy and self-care is essential. Maintain your strength and best wits and believe that the best is yet to come.
- Do not be too attached to the house to let go
- Do not compromise your profits. If there is a court order to sell, the more reason to maintain the home in good shape to increase the chances of making a good sale.
- Hire a stager to maintain the house in good looking condition. You might not have the energy to fix things, but remember that you need every penny coming from the sale.
- Keep copies of everything that could be important in selling the house
- Ensure that the real estate agent you hire is familiar with divorce matters.
- Do your homework on the vital details of the house like mortgage balances.
It is not uncommon to ask yourself “how does selling a house work during a divorce.” If you are facing such a situation, remember that you need to keep your head level. Successful selling of the house can only be achieved if you and your partner can agree on the way forward.
A divorce attorney can play a significant role in making the process easier for you. A real estate agent also serves to help you make a great deal. However, remember not to keep your hands off the process entirely. After all, it is still your house, and you have a stake.
If you’re in any where in America and you want to sell your house, ASAP Cash Home Buyers is here to help. Just contact us, and we’ll do the rest.