Equity Release

Selling Your Property Before the Divorce: All You Need to Know

Tom BurchnellReviewed by

Planning on selling your property before divorce settlement? Read on to learn more about when to sell and the benefits of selling the property before divorce.

If you’re a homeowner with a divorce in progress or on the horizon, you probably know that an impending house sale is among the biggest stressors. There are a lot of details and checklists to figure out, and one of the most important is the timing of the marital property sale. 

Divorcing spouses can opt to sell a home before, during, or after a divorce. They can also choose to access their equity through a home equity loan alternative. The decision isn’t based on how much of a procrastinator you are or whether February roads are too icy for a move in your state, however. 

If you're selling property before divorce settlement or after, the timing of your sale could: 

  • Increase or decrease your capital gain taxes
  • Have an impact on your financial settlement 
  • Allow a judge to control some of the decision-making

Once the “if” is out of the way, and you’re definitely going to sell the house, the “when” is your next critical decision.

When to Sell: Before or After the Divorce?

Whether you’re a family of seven or if it’s just you, your ex, and your cats, there are some common questions to consider when deciding when to sell during a divorce or legal separation. Some of the following things to factor in include:

  • Family needs – You might need to consider school year timing as part of a post-sale move. If you have children, you might want to avoid disrupting activities or school terms if the post-divorce move takes them to a new school or new district. 
  • Number of households – Does your current home allow enough room for you to each have separate physical space? Will you be separating into two homes before the divorce? If you have children, are there any child custody implications?  Do some research about the divorce law or your state laws. Be sure to also check in with your divorce lawyer about plans for where you’ll each reside, the marital property division, and whether your state requires an official separation period.
  • Total housing costs – How does maintaining the current home factor into your budget leading up to and through the divorce? If you were already living at the edge of your means, selling sooner may save you big, particularly if your divorce becomes less than amicable or goes to court.
  • Potential profit from sale – Living in luxury? If your house sale might generate a profit above $250,000, Uncle Sam is going to take a bigger slice of the pie after a divorce proceedings.

There is no one right answer that fits every situation, and there are considerations other than financial to ponder on. Both divorce and home sales are major life events that can take a toll on your emotional and physical health. You need to understand the available choices and their financial outlooks, but also look at what other costs and benefits are important to you and your family.

Benefits of Selling Before a Divorce Settlement

Selling real property before divorce settlements is something a divorce attorney and realtor usually recommend. Reasons for this include: 

  • Seller’s advantage Real property is one area where U.S. citizens join much of the rest of the world in the age-old tradition of haggling. If they know the seller is in a rush, desperate for a sale, and resents the entire process, a buyer is likely to gain the upper hand. Starting the sale process as soon as the decision to divorce is finalized can allow you the time to value, prepare, stage, and sell your home for the best outcome.
  • Capital gains tax – You’re taxed on the profit earned from the sale of your home if it’s above a set level: $250,000 for an individual and $500,000 for a married couple. So there is a $250,000 difference of potentially taxed income unless you’re married, both living in the home as a primary residence, and filing jointly at the time of the sale.
  • Asset transparency – When you sell before a divorce settlement, you’ll both know exactly what amount is available to split. Home sales involve closing costs and settling whatever remains on any existing or behind mortgage payments, or liens against the home. There may also be pre-sale costs related to staging or fixing up the house or final repairs or costs after the prospective buyer has the house inspected.
  • Deadline utility – You’re both motivated and working toward a deadline when you sell prior to the divorce settlement. 

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How to Sell Your House Before a Divorce

Before we look at some more concrete steps to sell a house before a divorce, there’s a more nebulous but entirely crucial component: civility. As hard as it may be, and as much as it may be a case of “they started it,” keep in mind that being calm, thoughtful, and civil is the most that you can contribute to both of you operating in that frame of mind. 

If you’re unable to complete the home sale before filing for divorce, wrapping the sale into the divorce process can make it much more unpleasant and less profitable. In many states, it takes as little as 30 to 90 days for couples to finalize an uncontested divorce. But a divorce or legal separation that goes to trial takes, on average, 17.6 months and ends in higher attorney fees from your billable lawyer. 

Step #1: Get Dual House Appraisals 

An appraisal is a must for pricing the home, but it’s an excellent idea for each of you to select and hire an appraiser. Having dual appraisals is a good idea for any home sale to provide extra protection and ensure one professional doesn’t miss anything in a home appraisal checklist. The finished reports can be compared, and you can ask for the appraisers to re-check and explain any discrepancies. 

For a home sale leading to divorce, separate appraisals are also a way for each person to protect their interest. If you’re ready for step one, learn how to get a home appraisal with our guide.

Step #2: Agree on a Real Estate Agent

Similar to the appraisal process, a good practice is for each person to select a realtor or two and request a comparative market analysis (CMA) from them. Also ask: 

  • Do they have experience working with divorcing couples?
  • How soon do they think the home will sell?
  • How will they promote your home? 
  • Will they host an open house? 
  • If yes to an open house, what are their practices on security, catering, advertising?

Once you’ve each done this, sit down, compare notes, and select an agent that you’re both comfortable with. 

Step #3: Negotiate the Work Needed to Prep Your Home for Sale

If you’ve got a rusty car on blocks in the front yard and underwear drip-drying in the bathroom, an open house probably won’t attract sellers eager to meet your listing price. But beyond cleaning and organizing, many quick cosmetic fixes can be done to improve curb appeal and first impressions. 

Schedule another meeting time with your current spouse to come up with: 

  • Improvement projects – What work on the house or yard makes the most sense to attract potential buyers? Take another look at your appraisal reports and recommendations from your real estate agent, but also: stay realistic. How much will these projects cost in handyman labor, tools, or supplies? Are there some that can be done by one of you?
  • Job list – In addition to improvements, what needs to be done in terms of cleaning, organizing, and preparing for house viewings as well as splitting up personal property and moving out? Do you need to rent storage to help with staging the home or store items that you need time or help split up?
  • Schedule and assignments – Add reasonable timelines to the big projects and write down who is responsible for what. 

Step #4: Agree on a Realistic Budget and Forecast

Write up some reasonable calculations that project the sale amount and any potential profit. Remember that whatever the final sale price, before you get to splitting up the money and rolling around in it, you need to subtract: 

  • Current mortgage payoff amount 
  • What you’ve agreed to spend on repairs, cosmetic upgrades, or home staging 
  • Any repairs agreed upon after the buyer’s home inspection
  • Closing costs (average 1 to 3% for sellers)
  • Realtor commission (average 5 to 6% for sellers)
  • Taxes on house sale profits over $500,000

Step #5: Agree on a Minimum Sale Price

Use your projected budget to agree on the minimum amount you need to accept an offer on the house. You’ll both need to sign off on a sale agreement, but having a documented expectation now can help limit last-minute dithering, especially if an offer hits on a day when neither of you is feeling civil or communicative. 

Looking for an Alternative to Selling Your Home? Try EasyKnock

If you’re headed for divorce, you need to know what options you have to turn marital assets into separate property. While selling your house is a frequent path, if you’re looking to delay a house sale or refinance, consider accessing your home equity. 

Wondering how to split home equity in a divorce? EasyKnock can help. We offer a range of solutions that don’t involve the complex requirements, steps, and costs of selling or remortgaging a home through a traditional bank or lender. 

We can work with you toward an outcome that protects your home and keeps you in it while converting your equity to cash to help with critical needs like dividing marital assets for divorce. How do we do this? You’ll sell your home to us  and then you can live in it as long as you need to as a renter. Eventually you can choose to repurchase your home or move out, or even stay as a renter indefinitely. 

Find out more today about how we can help. 

*This article is published for educational and informational purposes only. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process.

Sources: 

  1. DivorceNet. A Guide to Different Types of Separation: Trial, Permanent, and Legal Separation. https://www.divorcenet.com/resources/family/types-separation.htm
  2. It’s Over Easy. Selling Your House Before a Divorce: A Surprisingly Good Idea. https://www.itsovereasy.com/insights/selling-your-house-before-a-divorce-a-surprisingly-good-idea
  3. H&R Block. Home Sale Exclusion. https://www.hrblock.com/tax-center/income/real-estate/home-sale-exclusion/
  4. 3StepDivorce. How Long Does The Average Divorce Case Take? https://www.3stepdivorce.com/howlongdivorcetakes.shtml
  5. OpenDoor. How much will I make selling my house? https://www.opendoor.com/w/home-sale-calculator
Tom Burchnell
Product Marketing Director

Tom Burchnell, Director of Digital Product Marketing for EasyKnock, holds an MBA & BBA in Marketing from University of Georgia and has 6 years of experience in real estate and finance. In his previous work, he spent time working with one of the largest direct lenders in the SouthEast. 

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