Selling Your Home During a Divorce

Did you know that 33% of all couples broke up or divorced during COVID?

Whether you are still slogging through that or find yourself in a more recent split, you don’t have to do it alone. 

While we are not attorneys or trained in law, we ARE allies who have experience with how divorce can impact our clients. As realtors we wear many hats and can assist you as a neutral third party as you separate and sell your real estate assets.

Divorce and separation are technically two different things, lenders view them the same and attorneys, mediators, and the courts are involved in the process.

Technically, divorce is a lawsuit, where one party is suing the other to get out of the marriage contract. “Going through a divorce”  is the period of negotiating on how to get through it.

The goal is that each party agrees to a judgment of dissolution. If not, they go to trial and it can take 90 days to 5 years to complete. The longer timeline is usually an issue of assets and discrepancy in income. Average is 1-1.5 years. Once a suit has been filed you can not sell any assets without agreement from both parties.

Legal separation is when spouses are still married but still divide their assets. People sometimes choose this route as it can be financially beneficial. In order to transition to divorce, a separate petition must be filed. From a lender’s perspective, divorce = (is equal to) legally separated. 

Whether it’s because of a court order or simple logistics, most divorcing couples choose to sell their home when liquidating their assets.

The realtor who guides you through this process should be empathetic, diplomatic, patient, unbiased, and willing to communicate separately with both parties.

During divorce proceedings, the division of real estate is often a primary focus. It’s likely one of your biggest assets and can hold sentimental value, stirring up some tough emotions. 

Deciding who gets to keep the home or how to divide the proceeds from selling can be complicated. The ideal is absolute agreement among both parties. However, in most cases, lawyers mediate and the court dictates who gets what, and the judge approves the divorce decree.

When two parties can’t agree, it may be best to sell the house during a divorce and start fresh.

So who gets the house in a divorce?

The most common solutions for the way real estate will be divided in one of the following ways:

• Both spouses agree to sell and proceeds are divided 

• If kids are involved, one spouse may stay in the home for a specific period of time, typically until the youngest child turns 18, then the house may be sold.

• One spouse buys out the other party and gets to keep the home.

The solutions can vary greatly depending on how amicable the parties are, and if they agree or not.


Some alternative solutions include:

If one party wants to stay in the house, one creative option is to refinance the house while your are still legally married to avoid issues with financing terms down the line once debts and income are split, then move forward with the divorce proceedings after.

Co-own the home with your ex-spouse. In this scenario, you’ll agree on how mortgage payments will be split, when they’ll be paid each month, and how to distribute the proceeds of a future sale. Children can stay in the home and nobody has to worry about dipping into savings to buy out the other person. 

There are a couple downsides to this solution however: 

• Any late payments will affect both parties' credit scores. 

• Also, in the event of a sale, a homeowner who doesn’t live in a home as a primary residence for at least two of the previous five years will have to pay full capital gains tax on any profit.

Situations to avoid:

A short sale means you have to sell the home for less than you owe and all the proceeds go to the bank. If this is the situation you are in, it may be best to hold on to the house as long as possible (if you can afford it) or rent it out.

When spouses can’t agree (one wants to sell and the other does not) the court can force a sale of the house. In these cases, all communication goes through attorneys, eating into the profits from sale.

Now that we’ve explored creative ways for parties to keep their real estate or stay in their home during and after a divorce, let’s explore reasons why a divorcing couple might HAVE to sell their house.

You don’t have to sell your house during a divorce but there are a number of reasons why selling may be the easier choice:

• One party simply can’t afford to keep the home on a single income

• The spouses disagree and the courts mandate it

• One spouse may not want to take on the risk or liability of homeownership alone

Now that we’ve considered whether to sell, let’s discuss the WHEN.

The benefits of selling your home BEFORE the suit is filed and divorce proceedings begin is that both spouses will get to take advantage of the Home Sale Tax Exclusion. 

Married couples can exclude from capital gains taxes up to $500,000 profit on the sale of their home, as long as they've lived in their home for 2 of the past 5 years.

Couples can use this exception whether they file a joint tax return or if they file separately, so you don’t have to still be married when it's tax-filing time.

Selling your home DURING a divorce is just like selling at any other time, except you will need to have full written and verbal agreement on who gets what when it’s time to divide proceeds.

It is advisable to work with a realtor who has experience working with divorcees and attorneys, and it can be prudent to get broker price opinions from at least 2 sources and possibly even an appraisal so that there is ample evidence to support the home’s list price when it comes to market. As long as the parties are not in a rush to sell, you should get fair market value.

If you are wondering what’s next, we’ll help take care of the rest. This time in your life is hard enough. We are here to support so all you have to do is accept an offer and divide the assets.

Want to know what your home would be worth if you sold today, reach out to us for our free broker price opinion.

Also, we can discuss your situation and help you decide whether to sell or not. We’re here for you!