Selling a Home in a Divorce? Avoid These 7 Common Mistakes

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Divorce adds risk and stress to the already-intense process of selling a house, sometimes to the point of unraveling the entire deal or making a home unmarketable.

On one occasion, an estranged spouse returned to the house to claim belongings in the middle of a showing, said Stacey Wyatt, a top-selling agent in the Atlanta area. The spouse and the former partner started arguing about artwork kept in an attic, in front of the agents and prospective buyers.

“They’re obviously going through what typically is a messy or tough situation, and there is a lot of charged emotion,” said Wyatt, who regularly works with divorcing clients on their real estate needs. “There’s a lot of stuff going on behind the scenes I may not be aware of, such as battles over kids. It all comes into play.”

According to the Centers for Disease Control and Prevention, there are 827,261 divorces and annulments nationwide on a yearly basis. At a rate of 3.2 divorces per every 1,000 people, chances are, you or someone you know may have to sell your house under these circumstances.

However, there are ways to sell a home in a divorce without jeopardizing the deal so you and your former spouse can start fresh. We’ve rounded up some common pitfalls for separated and divorced couples that savvy agents like Wyatt have experienced and how to avoid them.

A divorce decree signed before selling a home.
Source: (edar/ Pixabay)

Mistake #1: Not sharing relevant portions of the divorce decree with your real estate agent.

Wyatt asks for the divorce decree’s details about the real estate sale before even listing the property. “They do have some specific stipulations in there,” he said.

These often involve which spouse the court has appointed to act on behalf of the couple—typically, the spouse still living in the home—the listing price, and when to reduce the price to a certain point. Other decrees can discuss who is responsible for any home repairs and how to get approval for those costs.

“The worst thing that could happen is you think that the one spouse has full authority. They’ve signed a listing agreement, and you get an offer. Then all of a sudden, you realize you have to have both spouses’ signatures, or it has to meet a certain net to accept an offer. I need to know that up front, or else we’re wasting a lot of time and energy.”

Mistake #2: Hiring a real estate agent who’s never served divorcing clients.

“If you’ve not been through enough transactions, which already can get sticky, you’re going to get an eye opener in a divorce,” said Wyatt. “[Clients need to] know that I’m strictly there to extract the top dollar for their house and make it as easy of a situation for them as possible.”

In addition to sheer real estate experience, an agent who’s worked with divorcing clients in the past will be best positioned to serve your needs, period. Some agents even go through special training to become a real estate divorce specialist. Most importantly, you need to trust that your agent can represent you as a neutral voice of reason with expertise on matters such as pricingmarketing, and home improvements.

In addition to keeping cool under pressure, an agent who has served divorcing clients will be experienced in coordinating showings and communicating with both parties to ensure everyone stays informed. “We always have to remember there’s another spouse involved, and we have to keep them in the loop,” said Wyatt.

A woman fixing a sink before selling a home in a divorce.
Source: (roungroat/ Shutterstock)

Mistake #3: Letting maintenance around the house slide.

This can happen inadvertently after one spouse moves out but can cause hiccups later.

And it’s not just buyers who you have to worry about keeping appearances up for. If the lawn starts to look shabby and overgrown, you could get slapped by your city for a code violation.

Wyatt worked with one couple who had been separated for at least a year. The estranged wife, who was living in the house with the couple’s children, worked a full-time job and was overwhelmed trying to maintain the property.

After the agent outlined repairs that “weren’t extravagant” but would help extract a good selling price, he had to consult with both spouses and even a judge to approve the expenses.

“The divorce decree was pretty specific on what money could be spent and who had to approve it,” he said. “I spent multiple phone calls with the husband and the wife, and then both of them on a conference call, trying to outline how much it was and who was going to do it, and then make sure that it got approved.”

#4  Both spouses move out, leaving the house bare for showings.

Empty homes can be harder to sell and don’t always show as well as furnished properties.  Buyers have a difficult time visualizing a space without the context clues of furniture and decor, while bare rooms can actually appear smaller than they are.

Soft staging techniques help add warmth to space where furniture’s lacking, or professional staging is always an option—but it’ll cost you when finances are likely already on the rocks.

So when both spouses move out of the house before it sells (whether it’s completely vacant or scattered with a few leftover furnishings) you risk damaging the marketability of the home—plus you’ve now just made it so there’s three housing payments to take care of between the two divorcing spouses.

Real estate pros suggest the best move is often for one of the spouses to stay in the house until it sells if possible. However, it’s ideal if you can make it look like both of you are still living there so that buyers don’t suspect there’s a divorce happening (we’ll discuss more on that below) and think they can make you a lowball offer.

A tax office used to help sell a home in a divorce.
Source: (Annie Spratt/ Unsplash)

Mistake #5: Failing to preserve the capital gains tax break.

In simple terms, the capital gains tax is a tax that you pay on the profit you receive from selling a capital investment such as a house. If you sell your house while you’re married, each spouse can exclude the first $250,000 of profit from your taxable income (for a total of $500,000).

If you sell your house at the time you’re getting a divorce, you’re entitled to exclude the same total of $500,000 of gain from tax if both spouses lived there for two of the five years before the sale, according to Oakland, California, attorney Emily Doskow, author of Nolo’s Essential Guide to Divorce.

However, several factors can affect this exclusion, such as when you file for divorce, when your home is sold, whether both spouses co-owned the house even though only one lives there, or whether one spouse buys out the other half of the house.

You can consult HomeLight’s guide to the capital gains tax and divorce for more information. Then review your options with a CPA or real estate attorney to minimize your capital gains tax liability and preserve the exemption in the event of a divorce.

Mistake #6: Allowing emotions to cloud decisions that impact the sale financially.

Divorce is the second most-stressful life event people experience, according to the Holmes-Rahe Life Stress Inventory, a tool that mental health professionals use to categorize stressful life events.

So it’s no wonder that selling a home in a divorce is fraught with emotion, especially if one partner doesn’t want to part with the property.

Even so, experts such as Rachel Fishman Green, an attorney and mediator at ReSolutions Mediation and Collaborative Services in Brooklyn, N.Y., advise not letting spite, anger, or bitterness take charge of your real estate deal. “I’ve heard horror stories of divorcing couples fighting and stopping a closing at the last minute because of some other disagreement in their relationship,” she said.

An empty closet in a home that is sold during a divorce.
Source: (Jose Soriano/ Unsplash)

Mistake #7: Making the divorce situation obvious to potential buyers.

Although market conditions certainly come into play as far as how fast a house can sell, seasoned listing agents don’t let on that their clients are divorcing. “Anytime I hear ‘divorce,’ I immediately think there’s a discount on the house,” Wyatt said.

If potential buyers ask why the family is selling, he says they’re relocating or downsizing. He’s also careful that the home doesn’t look like one of the spouses has left.

“We don’t want to put our clients at a disadvantage,” he said. “In a couple of divorce situations, especially on some higher-end real estate, we actually have them put male clothing in the master closet, so buyers would not pick up that it was a divorce.”

Selling a house in a divorce: Keep the focus on your next steps and financial future

While divorce can make selling a house more painful, there are professionals on your side, such as a lawyer or mediator, a financial planner, a tax professional, and your real estate agent. Focus on the sale as a vital part of starting a new chapter in your life, not as a symbol of your past, and sidestep rash decisions and impulses that could impact your financial future.