divorce couple splits marital house

Important Considerations When Selling a House During Divorce

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During a divorce, splitting assets, especially the marital home, is one of the most unpleasant realities of the process. In the midst of the chaos, your divorce attorney may advise you and your ex-spouse to consider selling the family home during a divorce. Let’s discuss what you’ll typically encounter when selling a house during divorce and how to solve common problems in the process.

First, What Does It Say in the Divorce Agreement?

In the Divorce Agreement there should be a divorce property settlement which outlines the division of assets. Both parties need legal representation in the drawing up of the Agreement so that the division of assets is fair and does not cause problems.

How much time does the divorce property settlement allow for you to sell the marital home and divide the proceeds? Time limits vary between the states, but it does not necessarily begin once the settlement is finalized. Seek legal counsel on the matter, but keep in mind: if you sell the family home before going to divorce court, it saves you a massive headache.

What if There is No Equity in the Marital House? 

Equity is the value of your interest in the property. In the case of the divorce court, it’s the fair market value minus the mortgage balance, secondary loan balances, and outstanding bills connected to the property.

Rather than guess at this number, it’s best you get the property appraised. Once the marital home is correctly valued, deduct all financial obligations to get your equity.

If a lot of money is owed on the house, then there’s no equity to divide. It might be better then to sell and pay off what is owed. Any remaining debt after the sale can then be divided between you and your former spouse.

What if Your Spouse Owned the House Before You Were Married?

If your ex-husband or ex-wife owned the family house before you were wed, selling it becomes a bit more complicated. Instead of focusing on the present day value, you need to look at the market value of the marital property at the time of your marriage.

Let’s say when you married, the family residence appreciated for $250,000. Throughout your marriage, you contributed to the mortgage, which means you increased the joint equity of the house – using separate property. At the time of your divorce, the marital house is worth $375,000. If your name was not added to the title, you have no ownership stake. However, you can argue that, when the house is sold, you should be given the value of the equity earned to match your contribution to the mortgage payments.

Additional financial contributions to consider include:

  • Home improvements
  • Home insurance
  • Property taxes

Always check with legal counsel to understand your position with the marital home and what is owed to you versus what you owe.

What if You Want to Keep the House During Divorce? 

One spouse may want to purchase the family house from the other spouse. What happens is, the buying spouse buys the other spouse’s portion of home equity, also called a house equity buyout. Then the spouse who keeps the house can have a change of mind and decide to sell the property.

If you want to keep the family home, your spouse needs to agree on (1) how the buyout will occur, (2) when you will pay the buyout amount, and (3) how you’ll pay – lump sum or installments.  There are issues if both your names are on the mortgage, in which case, you’ll need to refinance. Without refinancing, both parties are still legally responsible for mortgage payments, and the ex has claims on the house. Working with a divorce attorney increases your chances of a positive outcome, if you want to keep your house during a divorce. 

The Timing of Selling the Marital House Impacts Divorce 

Besides the emotional hurdles of ending your marriage, you have a hefty to-do list before divorce is final. You need to gather information for your divorce attorney, decide alimony and child support, sort out taxes and insurance policies, pay out divorce fees, and divide belongings. It’s a lot of stress, and you’ll have plenty of headaches and heartache.

If you want to sell before going to divorce court, but skip navigating a traditional sale, consider then selling to a real estate investor. Most investors pay cash for a property “as-is.” They do not ask for repairs but rather deduct repair costs from their offer to fix up the house themselves. There’s no lengthy mortgage approval, no warranties, appraisal, or inspection. Moreover, the investor covers all closing costs and additional sale fees, saving you money.

You can enjoy a quick closing, on a date of your choice – in 30 days or less, and worry about one less thing during a difficult time.

Conclusion

The timing for a property sale is affected when divorce happens. Sale after divorce, when the house is owned by both spouses, means ongoing legal advice and extending the cost of divorce.

Collaborating with an investor who has experience working with couples who are divorcing can expedite the process. So, not only can you sell your house fast during divorce, but also, you can make sure the divorce and division of assets happen more quickly, thus easing divorce legal fees.