While going through a divorce is traumatic, it is necessary to keep a cool head on the shoulders and think of the various implications. One of the most critical ones is dividing the assets of the couple.
Points to consider here are marital property that is subject to division and personal property that will not be touched in the divorce decree division of assets. When couples feel that a divorce cannot be avoided, they try to get as many assets on their side as possible, something that they should not do.
Assets typically shared by couples
Before going into selling a house before a divorce agreement, let us take a quick look at what assets couples typically share. The most common ones are real estate, bank accounts, and cars. Any property such as a marital home, rental property, or vacation home constitutes real estate. Checking and savings accounts that both parties had access to when married are categorized as bank accounts that must be split. When a couple has more than one car, that can be split easily too.
Apart from these moveable and immovable assets, there are investments to consider such as stocks and bonds, mutual funds, 401Ks, and other investments. Before a divorce is finalized, all these assets must be listed so that there is an equal division between spouses as per court decree and state laws.
In this post, we will go into the pros and cons of selling property before the divorce so that there is an amicable settlement about the marital home before court orders force an unpleasant situation for one party.
Selling House Before Divorce
Before selling property before divorce, always seek the guidance of an experienced real estate agent who will list the property and ensure that you get a fair price. At Just Livin Realty, we have helped many couples sell houses before divorce and avoid the complexities of rushing through a sale after the court orders so.
Let us now consider the various implications of selling a house before a divorce agreement.
Safeguarding your financial interests
Do not rush into selling your house before the divorce agreement. Asset distribution and property division is complex and doing it yourself before a decree leads to unwarranted pitfalls. Where do you stay? Do you alone have the financial means to get a mortgage to buy a house?
Hence, if you wait till after the divorce to sell the marital home if there is no buyout proposal from your estranged spouse, you can liquidate other assets for a down payment or to pay off debts to lower your debt-to-income ratio. It will help you to get a mortgage loan faster and more easily.
Further, if you sell your house before divorce, you can split the proceeds and settle financial matters more smoothly. You can clear off debts held jointly, cover legal fees, and be better prepared for financial stability in the years ahead.
Avoiding a traumatic situation later
For all the concerned parties, divorce and final separation are emotional challenges that are not easily overcome. When you get the final decree, the cut in the marital cord will be instant and sharp. Amongst this turmoil, selling your marital home and moving out to a new place can be an overwhelming experience.
Therefore, it is preferable to get prepared for the inevitable well in advance. When you sell the house before divorce and move into new digs, you somewhat soften the blow of divorce as you have ample time to prepare mentally for what lies ahead.
Reducing mortgage debt and maintenance expenses
When the marital home is bought with the combined resources of the couple, it makes sense to sell the house before divorce. It is not easy to pay the mortgage, and utility bills. Insurance, and taxes alone. If you cannot afford all these expenses from your income alone, do not hang on to the house purely for emotional reasons.
Cash-out equity for your future
When the divorce reaches the decree state and is finalized, you will need a fresh source of resources to fund your new life. However, this problem is greatly solved if you have a substantial equity in the home which generally is the highest value marital property you have. Those funds when you sell your house before divorce will play an important role in financing your future.
As discussed earlier, you can use the proceeds after selling your house before the divorce agreement to make provisions for a down payment for a mortgage loan on your new home, a short-term rental, or even relocate to another place.
Pay less or avoid capital gains taxes
For married couples, the biggest tax breaks they get is capital gains tax exemption. For example, before the final divorce decree when you are still legally married, you get an exemption from capital gains tax for home equity up to $500,000. It means that so long as the sale is closed before the finalization of the divorce, both spouses will, in all likelihood, avoid paying any tax on their share of the equity.
This reason alone is a very strong case for selling property before divorce.
Quickly get over the division of your biggest marital asset
Before an impending divorce, it is advisable to divide as many assets quickly and amicably as possible. Your marital asset being the largest in this category should be dealt with on priority. The faster you can complete this process, the less you have to pay attorney’s fees and court costs. Moreover, after a divorce, putting your property on the market can be seen as a distress sale and you are unlikely to get a good value for it.
To make sure that you get a price that is as per market trends, contact the real estate experts at Just Livin Realty. We will ensure that you do not lose out just because you are selling your house before the divorce agreement. The sooner you get the sale of your biggest asset out of the way, you have more time to deal with other more prickly issues.
Increase your negotiating power
You cannot keep your divorce under wraps, it easily slips into the public domain. Apart from the gossip factor which can be very annoying, buyers often have the perception that you are desperate to sell and might offer lowball offers. The only way to get out of this problem is to sell your house before divorce.
Maintain your property well with a lived-in look, books on the shelves, family photos on the walls, and clothes in the closet. It should appear to be a natural home sale and not one that you are forced into.
If you want to protect your privacy and get the best offer for your home, go for a cash offer rather than a public listing. Contact us at Just Livin Realty to know more about how we can help in this regard.