DISCLAIMER: As a friendly reminder, this blog post is meant to be used for educational purposes only, not legal advice. If you need assistance navigating the legalities of keeping your home in a divorce, HomeLight always encourages you to reach out to your own advisor.
For married couples, buying a home together is an act of optimism and agreement. But, if things don’t work out, the couple’s largest asset can become a major source of angst and contention in a divorce.
In the midst of myriad feelings and concerns, it’s understandable that you have asked the question, “Do I have to sell my house in a divorce?”
While selling your house and dividing the proceeds is often a logical, fair, or mutually accepted option, it’s not necessarily your only option.
In this post, we’ve gathered advice from real estate and divorce experts regarding what can happen to your house during a divorce, why you might need to sell your house, and the steps to sell a home during a divorce.
For this story, we are assuming the home was purchased by the couple and is joint property.
What can happen to my house in a divorce?
If the divorce lands in court, the sale of the house and the division of the proceeds may be ordered in the consent decree. Foreclosure or prenuptial agreements can also result in the loss of the house for one or both spouses. Otherwise, the fate of the home is typically negotiated between the couple (and their attorneys).
Here are the four most common ways to settle the house in a divorce:
- Sell the home and split the proceeds
- One spouse buys out the other party
- Divide large assets
- Both spouses temporarily co-own the house, which will typically result in a deferred sale
1. Sell the house immediately and split the proceeds
Selling the home prior to the divorce definitely saves time, money, and hassle. The couple pays only the routine real estate fees associated with any sale.
If they wait until during or after the divorce to list the house, each spouse is likely to submit the paperwork for review to that person’s attorney and pay hourly fees.
“It’s easier if they sell the house before the divorce and escrow the money,” explains David S. Rubin, an attorney with 45 years of experience in Baton Rouge, Louisiana. “Then you’re only dealing with the cash. They’ve paid off the mortgage, and you don’t have a problem with indemnification of the borrower.”
If you decide to pursue the sell-first strategy, be sure both parties are committed to the sale and stay legally married until the paperwork clears. That’s because if the home is jointly owned, both parties will have to sign all documents.
Divorcing in the middle of a sale can impact the escrow period and title. Even seeking counsel once the property is listed can cause a change of heart for either party or a shake-up that jeopardizes the transaction.
“A lot of our clients come to us before they have sought counsel with an attorney,” explains Lori Fowler, a top Fort Worth, Texas, real estate agent who estimates 20% of her business consists of clients involved in a divorce.
“They’ve decided to divorce amicably, sell the house, and split the profits equitably,” she says. “Then, they each want to relocate and find another property on their own. So, we just instruct the title company to divide the proceeds equally in half.”
It’s important to note that the property division laws of your state will determine how any proceeds of a home sale are divided in a divorce.
2. Buy out the other party
In this option, one spouse gains sole ownership of the property by buying out the other spouse’s interest in the home.
Typically, the spouse who wants to stay in the house must buy out the other spouse’s share of the equity by applying for a new loan in his or her name.
For example, if the house is worth $350,000, and the couple still owes $200,000, then the shared equity is $150,000. The spouse taking ownership of the home would pay $75,000 to the other spouse to buy out their interest.
The spouse accepting the buyout will lose out on any appreciation in value the home may achieve in the future. The buying spouse takes on all the liability and financial burden of the new mortgage, along with all other risks and responsibilities that come with homeownership.
A buyout can also be arranged to occur over time. Any kind of a gradual buyout arrangement is typically outlined in the divorce settlement agreement.
Shawn Leamon, a certified financial analyst in Dallas, Texas, who specializes in divorce matters, suggests talking with a mortgage lender before deciding if a buyout is a good option for you. “That can have a very big influence on your options.”
Buyouts in a divorce can be complex depending on your state’s community property laws. Consult with your legal or financial advisor to find out how this option might work for you.
3. Divide large assets
If a divorcing couple owns multiple shared large assets, such as a second home, large boat, RV, or a significant stock portfolio, sometimes the best option is to divide the assets evenly.
This option can take the sale of the primary home off the table. It can also be a more timely way to settle the divorce because it eliminates the need to wait for a real estate transaction to be completed, and takes away the often drawn-out negotiations about which party should receive a larger share of the appreciated value of the house.
However, dividing large assets can come with its own set of challenges. It can be tricky to negotiate and agree on the value of each large asset, especially in a contentious divorce.
It should be noted that selling the marital home and dividing any equity can also be considered part of dividing large assets.
4. Co-own the house
The option to co-own a home in a divorce is more common when there are children involved. It allows a custodial parent to continue to live on the property and have exclusive use of the house.
This strategy typically involves delaying the sale of the marital home until a set later date, such as when the child turns 18, or graduates from high school, at which time the home can be sold.
With a deferred sale, also known as a temporary delayed sale, the former couple comes to an agreement about how mortgage payments will be divided up, and which parent will remain in the home with the child or children.
In some situations, if an amicable agreement is not forthcoming, a custodial parent can file for a deferred sale order. Courts in states that allow this will typically base approval of a deferred sale order on two factors, is it in the best interest of the child, and is it financially feasible for the custodial parent.
Leamon says court orders can often be avoided with proper planning and communication. In fact, he explains, some couples with children will note in their divorce settlement paperwork that they’ll sell the house once their children are finished with school. “It makes more sense from a life perspective,” Leamon says.
Besides the obvious benefits to the children, another upside to a deferred sale is that both parties can benefit from the appreciation of the home’s value until that deferred sale date.
This option can also be used if you aren’t currently able to buy out your spouse. For example, if one spouse wants to buy the other spouse out but can’t afford to do it all at once, you might agree that payments can be made over time while both of you keep an interest in the house.
There are some drawbacks to co-ownership. You remain financially tethered to your ex-spouse through a shared mortgage debt, which could impact your credit score if they run into credit problems. You also will still need to maintain a working relationship with your former spouse, which can be challenging depending on the circumstances of the divorce.
Whenever you sell the house, the co-owner who has not been living in the home for at least two of the previous five years may have to pay capital gains tax on the proceeds. That amount of tax burden might significantly diminish your equity. Consult with your financial advisor before deciding on a co-ownership option.
Less common options
There are other less common options to keep the house, such as renting out the property as co-landlords; or a strategy called bird nesting, wherein divorced parents take turns living in the home when they have custody. Both of these involve a high level of agreement and interaction with your ex-spouse.
Why you might need to sell your house in a divorce
While options two, three, and four above might be what you were hoping for in order to keep your house during a divorce, there are a number of reasons it may be necessary to sell the marital property and divide the proceeds.
Here are some common reasons couples might choose the home-sale option in a divorce:
Neither of you can afford the home independently
In a divorce, both parties are typically accustomed to sharing the expense of maintaining a home. Alone, the financial burdens can stack up quickly.
“Can you pay the mortgage, property taxes, homeowners insurance, and maintenance? There are many hidden costs that homeowners incur,” says Denise Erlich, an Illinois attorney that specializes in divorce and family law. “You should not simply be comparing the monthly mortgage to the cost you would pay to rent a residence. Utilities are probably two times the cost in a house than an apartment.”
According to Leamon, if one party hasn’t worked for years or only worked part time, the financial limitations can be even more insurmountable.
You may also need the cash from your home sale to satisfy the divorce settlement agreement.
The courts may decide for you
In a disputed divorce, if both parties want the house and are unable to come to an amicable agreement, the courts will intervene. This can be time consuming and messy.
Divorcing couples often choose the option to sell the house immediately and split the proceeds for a quick resolution that allows them both to move on with their lives. “The majority of the time, neither spouse wants the other one living in the family home, and they both want to start fresh somewhere else,” says Fowler.
You can’t agree on the home’s value
This can quickly halt any buyout options or amicably dividing assets.
It can get even more difficult if you’ve made improvements to the house during the marriage, or one spouse originally purchased the home. Couples can come to a contentious stalemate as far as who’s entitled to what amount of equity.
“The wife might own a home when they get married without marital agreement,” says Rubin. “If the house zooms up in value by $100,000, or they add on a room during the course of the marriage, there’s an argument that the husband has a right to half of that.”
Demands of ownership and liability are too much for you to carry
Even if one spouse has the financial wherewithal to refinance and buy out their spouse’s interest in the property, doing so may come with a burden too heavy to bear on a single income, and without shared resources of time and energy you may have had before.
Taking on all the liability risks and financial requirements of mortgage payments, property taxes, home maintenance, and upkeep can be daunting for some. And while the desire is admirable, if the circumstances become overwhelming it could cause you to eventually lose the home or damage your credit.
It’s just too emotionally painful to remain in the home
Your home is where you’ve created countless memories. It might also be where you’ve raised your children. Selling the home may be a hard but necessary step to give you a fresh start in life, or perhaps a way to heal or grow again.
Your neighborhood also might not feel as comfortable now that you’re getting a divorce.
“That happens a lot, especially with planned unit developments,” says Aimee Anderson, a real estate agent in Raleigh, North Carolina, who works with 68% more single-family homes than the average area agent. “There’s always a big rift when friends get divorced — half the neighbors side with one side, half with the other.”
Steps to sell a home during a divorce
Step 1: Hire a divorce specialist real estate agent
Select an agent who is either a Certified Real Estate Divorce Specialist (CREDS) or one with proven experience and results when handling divorce home sales. It should be an agent that both you and your spouse trust.
A qualified agent will not only be able to move the sale along and get top dollar for your home, she or he will also understand the need to maintain neutrality and how to help both parties find common ground during the process.
HomeLight can connect you to a top agent in your area through our Agent Match platform. This free tool analyzes over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
Step 2: Agree on home sale specifics
Be certain that you and your spouse agree on the home-selling objectives. These include:
- Your home’s listing price
- The lowest offer you’re both willing to accept
- Whether to sell the property “as is” or make repairs
- What repairs to make or skip (follow your agent’s lead on these)
- The value of any upgrades made on the house
- Which is more important, getting top dollar or a fast sale
Step 3: Know what to expect in order to close the sale
There are a number of decisions and challenges that can arise in a home sale. Addressing them as they come up can be more complicated when you are trying to navigate a home sale with an estranged or uncooperative spouse.
Hopefully, you can agree that by anticipating challenges in advance you will both benefit from finding common ground on how to handle each one. Some of the decisions you may encounter include:
- How to handle any buyer repair credits or financing concessions
- How you will decide which offer is best for both parties
- Who will schedule and attend showings
- How to handle keeping the home clean and staged
Step 4: Divide the proceeds
According to Rubin, during a divorce, there’s frequently a hierarchy of legal, financial, and logistical considerations that govern what happens to property, including the house. How the proceeds of your home sale will be divided is best handled by your attorneys. “It’s always best to consult a local attorney because the laws in each state vary,” he advises.
In one state, every asset acquired during a marriage might be considered community property, which means any real or personal property is owned jointly and equally by the married couple. This includes any income, regardless of who earns or spends the money.
In another state, a judge may decide how to divide assets in any way that she or he considers equitable to both spouses. If the judge determines that one spouse has been paying more of the mortgage or expenses on a house during the marriage, that spouse may be awarded a larger share of the home sale proceeds.
But if you’ve made it to step four, you’ve already cleared one of the highest hurdles in a divorce.
Divorce is hard enough: Allow yourself to get help
You’re not alone in what you are facing. According to the CDC, in 2021, there were 630,505 divorces with 45 states reporting and Washington, DC.
Whether you choose to sell your home, buy out your spouse’s interest, divide large assets, or co-own the house with a deferred sale, the path to closure and starting over will be easier with the help of professionals who know what you’re going through and how to deliver the best outcome possible.
One of the surest ways to make it easier is to partner with a top-performing real estate agent with experience in navigating a home sale during a divorce.
Writers Adrian Hirsch and Valerie Kalfrin contributed to this story.
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