What Happens to a House in a Divorce

When going through a divorce, it is necessary to make decisions on how to split shared possessions, such as a home. This does not mean selling the house is the only choice available.

Who gets the house in a divorce?

When going through a divorce, the division of assets, including the home, will depend on when it was acquired and the state you live in. Each state has certain rules that will apply if your case goes to court. If you and your partner are able to negotiate a settlement without the involvement of the court, then you can make a decision that works for both of you.

Marital Property

In most cases, anything that either partner obtained or earned while they were wed is considered to be marital property. This could include income generated from work, vehicles, and the house that was bought together.

Separate Property

The ownership of a home can differ depending on various influencing factors, such as the state you reside in, which can either be a community property state or an equitable distribution state. This will determine whether the home is categorized as marital property or separate property, with the latter only belonging to one of the spouses.

Community Property States

In a state with community property laws, most things obtained during the marriage are jointly owned by both partners, including income, assets, and debts. Some items, such as property owned prior to marriage, are an exception. If you owned your home before you got married and your spouse’s name was not added to the title, you keep sole ownership, but your partner may be entitled to half the value of the house appreciation during the marriage; it is recommended to consult a lawyer to clarify this.
In nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), property acquired by spouses during their marriage is considered shared. In Alaska, couples may choose to have their assets be community property if they declare it before or during their marriage.

Equitable Distribution State

In the majority of states, assets are divided fairly, though not necessarily in equal portions. In a jurisdiction where an equitable division is mandated, a court of law could determine who receives which assets based on their income, economic contribution, or what they are projected to make in the future.

Prenup & Post-nuptial Agreements

Nuptial agreements are contracts made before and after a marriage, which outline who will have ownership of assets and debts in the event of a divorce. These documents clear up any confusion and will remain valid regardless of the state in which the couple resides. They are usually used when one or both partners have substantial assets prior to the union.

Options For Dealing With the Family Home When Divorcing

When you and your partner are parting ways and have a shared home, there are a few choices to consider for its disposition.

Keep the House But Divide Other Assets Equal to Value of the Family Home

If you and your partner possess a great deal of wealth, such as a home and a second property or a large stock portfolio, it may be decided to evenly split these items. For instance, one partner could keep the home, while the other retains the boat and the investments.
Division of assets may be a more expedient way of settling a divorce than waiting for the sale of a property or haggling over who gets the most of the increased value of the home. However, both parties must still agree on the worth of all assets to reach a fair compromise.

Buy Out Your Other Spouse

In an equitable distribution state, a buyout may involve one spouse paying the other half of the market value of the home in order to gain sole ownership. This amount can change depending on the parties’ income, financial contributions, and potential to earn money.
One spouse might keep the family home for the sake of their children’s security, or because it’s close to important places. If the housing market isn’t ideal, this could be a good option. Remember though, the person doing the buying out needs to have a lot of money that’s not part of the divorce settlement. It’s also important to make sure they can still afford the monthly mortgage payments on one income.

Co-own the Home With Your Ex-Spouse

Parties going through a divorce may opt to continue owning property together, with decisions such as how the mortgage will be split, when payments are due, when the house will be sold, and who will receive the proceeds from the sale all determined by the couple.
Exploring this path is beneficial as it enables kids to remain in the family home, and is a viable choice for those unable to purchase the other person’s share.
It is essential for both parties to be in agreement to ensure timely payments, as late payments can detrimentally affect both credit scores. Furthermore, if the owner who is not living in the house decides to sell, they must be conscious of the capital gains tax exclusions. If the house has been owned for five years, but not used as a primary residence for two of those years, the owner will be responsible for capital gains taxes on the value appreciation.

Sell the Marital Home

A divorcing couple may choose to put their home up for sale and divide the money, which can provide them both with funds to cover legal fees, pay off debts and find new places to live. Be aware that if the home has not been owned for two years or more, any profits made will be subject to capital gains taxes.

Selling the Marital Home

For a divorcing couple to successfully sell a home, it is important that all parties involved have a mutual understanding and work together in order to make decisions on the list price, contract negotiations, and closing date. Communication and collaboration between the spouses and their attorneys are essential for a successful sale.
When looking to enhance the value of your home, you must decide whether you want to invest in renovations or keep the property as it is and put it up for sale.
Finding a representative that both you and the agent can accept is essential.
Prior to beginning a marketing campaign, it is important to decide how to share the expenses of hiring a photographer, setting up online advertisements, and arranging the space.
You and your spouse must come to an agreement on the amount to list the home for sale, which can also influence other aspects of the divorce proceedings.
If you and your partner are looking to offload your shared residence rapidly, you may contemplate selling it to an investor.
It is excellent news that you have been offered something. Both sides must agree to the details of the offer, or agree to alternative terms if further discussion is desired.
When selling your house, you need to figure out who will be responsible for paying the mortgage throughout the selling process and how the money will be returned after the sale is complete.
When selling a house, there can be a lot of costs associated with it, such as renovations, marketing, and commissions. Before the profits are divided, it is important to ensure that both parties have paid all the relevant expenses incurred during the sale. Generally, this includes paying the mortgage, equity lines of credit, any unpaid property taxes, agent fees, and closing costs.

Tax implications

 

When selling a home, capital gains taxes are something to be aware of. These are the federal taxes you pay on the money made from the sale if the value has gone up. Thankfully, the home sale exclusion allows you to be exempt from paying taxes on up to $500,000 of the profits, if you’ve lived in the home for two of the past five years. It is advisable to talk to a tax specialist before making any decisions regarding capital gains.
If both you and your partner have lived in the same house for two out of the last five years, you are eligible for a full exemption of up to $250,000 for each person, or a total of $500,000 for the two of you.
When divorcing, it may be advantageous to wait until the house is sold and taxes are filed jointly before finalizing the divorce. Doing so could ensure that the full tax deductions are taken advantage of.
If you and your ex-spouse choose to wait until the divorce is finalized to sell the home, each of you can take advantage of a $250,000 exclusion from capital gains taxes, provided you both have resided there for two years. However, it is important to act quickly and sell the home before three years have passed in order to avoid any additional taxes.

Timing a Sale is Important

After agreeing that selling is the preferable option, you may be eager to move forward. Nevertheless, it is wise to take into account a few crucial timing-related tips.
In order to make a successful sale quickly and for a higher price, aim to sell when there is an abundance of potential buyers and a limited number of items on the market.
It is beneficial to come to an agreement on the sale of a home without judicial intervention. If the two parties cannot resolve the issue, a judge will make the decision. A prolonged court case can be costly and the results may not be ideal.
Don’t let your tax break expire: Make sure to sell your house within three years of moving out in order to be eligible for the capital gains tax exemption.

Selling a House

Before a Divorce

It is possible to sell a home before a divorce is filed, and this is treated the same as any other sale during a marriage. By doing this, both parties can use the money earned to find new housing, pay off debts, and get legal assistance.

During a Divorce

Once a divorce is initiated, it is usually not allowed to sell the family home without a court’s permission. Trying to do so during the divorce can cause complications, as it involves more legal work and requires mediating the division of assets.

After a Divorce

Delaying the sale of a home until the divorce is complete can make the division of profits more complicated, as you’ll need to figure out how to share the gains earned since the divorce was finalized. Since both parties will be responsible for the mortgage payments (and any new housing costs) during this time, there is a greater chance of missing payments.

Divorcing? MyHouseIntoCash Can Help

If you are divorcing and need to sell your marital home, we can help.

We buy houses for cash everyday and know this is an emotional and stressful time that requires a delicate and caring touch.