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Selling House Before/After Divorce – What Should You Do

Rarely are divorces smooth and amicable affairs, rather, when it comes to property division, they can be very messy and traumatic for both parties. When a couple owns a house, several questions crop up. What should you do with the property, should you sell your property before or after divorce, should one spouse buy out the other, and what is best for the children are typical doubts that need to be cleared.

In this post, we will go into the details of whether you should be selling the house before or wait for selling the family home after the divorce. 

Benefits If You Sell The House Before Divorce

Selling your house before the divorce is finalized has several benefits as you save a lot of money, time, and effort.

# Cost saving is a big positive if you sell your house before divorce. If you wait till after the divorce, you will most likely pay your individual attorneys by the hour to sort the matter out and divide the proceeds. On the other hand, if you sell your house before the divorce and escrow the money, you will only be dealing with cash later which is easier to split after the divorce goes through.

In a sell-first approach, both parties must be committed to it and stay legally married till the sale goes through. Selling a house during divorce is a very complex affair.

# The combined earnings of couples make homeownership affordable. But after divorce, paying the mortgage, maintenance, and home utilities can be very difficult to do alone. If you cannot afford these expenses alone, sell your house before divorce keeping your future financial stability in mind.

# Use the equity to fund your future single life. Even if assets are divided 50/50 in a community property state like California, the funds can be used for a down payment for a new home, temporary rental, or relocating to another city or state.   

# Avoid or pay lesser capital gains tax by selling property before divorce. The capital gains tax exemption is one of the biggest tax breaks for married couples and by selling your house when you are legally married, up to $500,000 of home equity is excluded from capital gains tax. This is probably the biggest incentive to sell a house before divorce.   

Downside Of Selling Your Property Before Divorce

# Selling a house can take months after it is listed, more so if the market is going through a recession. When the proceeds of the sale of the house are a part of the settlement, the divorce might not be finalized before the transaction is closed and the equity proceeds are credited to the bank account. Further, if every decision like repairs, price, and staging becomes a tug-of-war with your soon-to-be ex-spouse, the divorce proceedings can drag on for months.

For a faster sale of your house before divorce, get in touch with experienced realtors Just Livin Realty, and our experienced professionals will make it happen.  

# If potential sellers are aware of your distressed sale of the house before the divorce, they might take advantage of it and offer lowball prices. In your anxiety to quickly sell your house before divorce and get it off your shoulders, you might accept the low offers, thereby putting you at a loss.

Now that you have read about the pros and cons of selling property before divorce, let us turn our attention to selling your family home after divorce. 

Benefits Of Selling House After Divorce

# Before and during divorce proceedings, there will be a lot of bitterness, anger, and resentment, all traits that do not allow for rational and logical decision-making. It is especially true about the division of marital property. A divorce decree will generally lead to de-escalation of emotional intensity, an ideal situation to make smart financial decisions like selling the house after divorce that will benefit you in the long run.

# When your mortgage payments are up to date and your house is well maintained, it pays to wait a while before putting your property on the market. The amount of your debt decreases, there by increasing the equity. While the housing market is generally volatile, house prices do not dramatically tumble unless there are some serious economic setbacks. Hence, by waiting and selling a family home after divorce, you can get a better price for it.

# Deciding the fate of the marital property is highly contentious during divorce settlements. You have seen in this post the drawbacks of rushing to sell the house before a divorce. If you are forced into such a decision, you might have to quickly vacate your house and relocate elsewhere. This move might cost you heavily if you have to move a second time to a permanent home. So, take your time and settle for selling your house after divorce after things have quietened down somewhat.

# Selling a family home after divorce gives plenty of time for the children to settle down and absorb the trauma of transition to a completely new environment. You can develop a plan that addresses the concerns of all the generations living with you. In the USA, almost 60 million adults live in multi-generational homes.

Disposing of a marital home can badly affect the emotional levels of the elderly and the kids. It is therefore important for them to first get used to the inevitable idea of a breakup during divorce proceedings. They will then be prepared to relocate elsewhere if you take things easy and decide on selling the house after divorce.  

Downside Of Selling Family Home After Divorce

# Sometimes the court might pass a decree ordering you to sell your house during divorce proceedings. However, if this is not the case, you might be divorced from your ex-spouse but will be still married to the marital home after the divorce. In such cases, as a co-owner, you must continue to pay your share of the mortgage, maintenance, utilities, property tax, and more, even if you are not staying in the house.

Moreover, the mortgage payments you make will count towards debt and the likelihood of getting another mortgage to buy a home will reduce greatly.  

# Putting off selling a family home after divorce has serious tax implications. If your house has been the primary residence for at least two of the last five years before the sale, you can exclude home equity income from capital gains tax. So, if you are the spouse who moves out of the house after the divorce and your house is not sold for several years, you will wind up paying a hefty capital gains tax.

You will accrue a large capital gains tax if you retain a high-end property either through a buyout or by trading it for other marital assets and then selling it for an enormous profit. Your exemption on capital gains will be limited to $250,000 instead of double that if you had sold it before or during a divorce. 

Summing Up There are thus two sides to the story, whether you should be selling a house before or after divorce. To get the best opinion as per your situation, get in touch with us at Just Livin Realty. We will study your options and guide you accordingly for the best results. 

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