As the timeless song goes, breaking up is hard to do. When it comes to marriage, it’s especially difficult. Besides splitting up emotionally, there’s a lot of physical splitting up of shared possessions to do as well.
And when you and your soon-to-be-ex-spouse own a house together, you’re often faced with the draining prospect of selling your marital home. But how and when to sell a home (and how to divide profits fairly) can quickly become a major point of contention.
After all, selling a home in the best of times has its share of stress. Add divorce to the mix, and you have the potential for a highly emotional and potentially bumpy ride.
So to help ease the process, we talked to the experts to get the rundown on some of the most common home-selling options to consider when you divorce.
Sell the house and split the proceeds
The most common way to divvy up the equity in the home is to sell it.
“Failure to agree on these issues can cause increased animosity between the spouses as well as long and financially harmful delays in the sale,” says Allen A. Drexel, a matrimonial and family law attorney at Manhattan’s Gallet Dreyer & Berkey.
How to split the money
In the interest of a quick sale with the least emotional tumult, sit down with your ex-spouse to determine how the profits will be split. Courts prefer a divorcing party to reach agreements on their own when divvying up money from a sale.
“This allows the parties to be flexible and creative regarding what to do with the proceeds,” says Marcie Patton-Coffman, senior litigation partner at Cordell and Cordell in Cincinnati.
For instance, the two of you might agree to use the proceeds to pay off marital debts or put them toward a child’s college tuition, says Patton-Coffman.
Determining your exact equity share depends on your state’s law regarding property division.
In community property states, the equity is split 50-50. In noncommunity property states, the court looks at how long you’ve been married, your income, and your contributions to the marriage.
Figure out when to sell your home
If you and your ex agree to sell the home and on how to split up the profits, the next step is figuring out when to sell your home.
Selling your house during a divorce will likely stir up more emotions than a typical sale because the home is a physical representation of the relationship ending.
But it doesn’t have to be that way if you time the sale right.
“My best advice for selling a house due to divorce is to decide to do it before or after the divorce is settled, not during the process,” says Tiffany Szakal, managing broker at The Local Element in Grand Rapids, MI. “As soon as you involve the legal system reviewing marital assets, layers of complexity pop up.”
In other words, if you sell your house during a divorce, you’ll have less control because the court will be in charge. So here’s what to consider about selling before or after the divorce proceedings.
Selling before the divorce: “If the home sale finishes before a divorce is finalized, the proceeds from that sale will need to be reported, negotiated, decided on, and divvied up with the court’s eye on it,” says Szakal.
And the sale will likely affect child and spousal support calculations.
Selling after the divorce: On the flip side, when a sale occurs after the divorce is finalized, the divorce decree will state how the sale proceeds will be distributed—or even if the home is to be sold at all.
“One spouse may have already made plans with how they were going to use the money from the sale,” says Szakal. “But a final decree can ultimately alter those plans for couples I’ve worked with.”
Buy out your spouse
Often, one spouse might want to keep the home, especially if children are still living there.
If so, the most common way to settle the ownership issue is for the spouse who wants to remain in the home to refinance. This will help one spouse buy out the other’s share by obtaining funds and getting the property in one name.
Remember that the spouse taking over the mortgage must qualify for the new loan based on their solo income.
Rent out the house
Still, it can be worth considering, especially in a stale market where houses are lingering for weeks or more.
“Renting [out] the home might produce an immediate stream of income, which could be used to help cover the carrying costs of the spouses’ replacement homes,” says Drexel.
And renting out the home until the market recovers is a way to retain the house and ease the stress of making mortgage payments.
Plus, renting it out leaves the option open for one spouse to eventually buy out the other’s interest in the property once the divorce is final.