Key Takeaways:
- You can choose to buy out your spouse, have your spouse buy you out, keep the house with one of you still living in it, or mutually sell the house during a divorce.
- Selling a house before or during a divorce can have significant tax benefits, as opposed to selling after the divorce is final.
- Selling your house can help both you and your spouse move on from the divorce with less emotional baggage.
- If you and your spouse agree to sell your house, you need to decide how to split the proceeds and the costs, prep the house for sale, and engage a sympathetic realtor that you both agree on.
- An easier approach for many divorcing couples is to sell to an investor, which allows you sell your house fast and receive the profits in a matter of days, with no hassle involved.
Selling a house during a divorce is a challenging and stressful experience, but it doesn’t have to be.
As a professional Real Estate Investor helping Californians sell their homes for over 15+ years, I’ve seen firsthand how a little planning and preparation can make all the difference when selling your house during a divorce in California.
In this article, I’ll share my tips and strategies for selling a house during a divorce in California as painlessly as possible.
Whether you’re looking to sell your house quickly and move on, or want to maximize your profits and get the best deal possible, I’ll show you how to navigate the process with ease.
Who Gets Your House in a Divorce?
In 2020, more than 630,000 couples in the U.S. filed for divorce or annulment. Nationwide, almost half of all marriages end in divorce or separation.
These couples have to decide how to split the property they jointly own, including, in many cases, their family home.
If you’re going through a divorce, deciding what to do with your most expensive asset is a challenge.
For most couples, there are three primary options available:
Let’s examine these three options in more detail.
1. One Party Buys Out the Other
In this scenario, one spouse agrees to buy the other spouse’s interest in the property. This is a common scenario if one spouse doesn’t want to sell the house but the other one doesn’t want to keep it.
The spouse with the greater interest in the property buys it from the spouse who prefers to leave.
The buyout could be equal to half the property’s original value, half the current market value, half the remaining balance of the mortgage, or some other agreed-upon sum.
Issues arise if the two parties can’t agree on a fair value for the house.
Of course, the party buying the house must have enough cash to do or be able to afford the mortgage on their single income alone. The buyer could also seek to roll this type of buyout into a more comprehensive refinancing of the property.
2. Both Parties Continue to Co-Own the Home
In this scenario, nobody sells anything. Both spouses continue to co-own the house and contribute to mortgage payments.
The big change is that the parties agree for one of the spouses to continue living in the house, typically with their children, while the other agrees to move out. This type of arrangement typically lasts for a set number of years, often until the youngest child turns 18.
At that point, the two parties can agree to continue with the current arrangement or to sell the house and split the proceeds in some fashion.
The main benefit of this situation is that the couple’s children get to remain in their childhood home with their custodial parent.
It’s also a good option if neither party has the money to buy out the other spouse. The big drawback to this option is that both parties are still tied to each other.
Depending on how amicable the split was, this may not be a tenable arrangement. Also, if one party is delinquent with their part of the mortgage payment, it affects the credit score of the other.
Both Parties Agree to Sell the House
For many divorcing couples, the right decision is to sell their house and continue their separate ways.
This option fully separates the financial arrangement between the two parties and minimizes the need for future interaction between the former spouses.
The two parties can split the proceeds from the sale equally or in some agreed-upon arrangement.
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Why You Might Want to Sell Your House During a Divorce in California
As you can see, a divorcing couple doesn’t have to sell their house during a divorce—although that might be the best option for both parties.
Here are several reasons why you might want to conclude your divorce by selling the house.
Financial Reasons to Sell
One reason that you might want to sell your house during a divorce concerns finances. When married, many couples have two incomes to help cover the mortgage expense.
After a divorce, both parties have only a single income, which might not be enough to cover a large mortgage. Selling the house so that both parties can buy or rent smaller and more affordable housing might be the only viable option.
Tax Reasons to Sell
There may also be a tax benefit for selling the house before the divorce is final. It all has to do with the capital gains tax, and how it applies differently to single people than to married couples.
In short, selling a house after divorce can cost you big bucks.
Under current U.S. tax law, a married couple who sells their house is excluded from paying capital gains taxes on profits of up to $500,000 on a home sale.
That means you could sell your home for a half million more than you paid for it and not pay any taxes on that gain.
A single person selling a house, however, is only excluded from paying taxes on profits up to $250,000.
So if you and your spouse sell your home after you’ve divorced, each of you will have to pay capital gains after the first $250,000 of profit on the sale.
The same applies if you get the house in the divorce and then sell it afterward. You’d have to pay capital gains taxes on any profit after the first $250,000.
If the capital gains on your property are relatively small, capital gains taxes shouldn’t be a factor in your decision if or when to sell.
But if you’ve lived in your house a long time or it’s significantly appreciated in value, selling your house before you finalize your divorce could save you (and your soon-to-be-former spouse) some significant tax money.
Legal Reasons to Sell
When you divorce, you need to come to an agreement with your former spouse as to who gets ownership of what assets.
For many couples, their home is the biggest asset they own. If you as a couple cannot agree as to how to divide that (or any) asset, the courts will do it for you.
This means that you’re betting on the judgment of the court to make a fair and equitable division of property.
In the case of your house, you might hope for a 50/50 split, or maybe something better. However, there’s no guarantee the court will agree with you, especially if you and your former spouse are in contentious proceedings.
It may simply be easier for all concerned to agree to sell the house as part of the divorce, rather than relying on a judge to decide who retains what kind of ownership.
In short, selling the house upfront could help to avoid a long and costly legal battle.
Liability Reasons to Sell
Some couples agree to let one spouse continue living in their former house but maintain joint ownership of the property.
This may seem like a fair solution, especially if there are children involved, but it comes with its own set of liabilities.
If you agree to let your former spouse continue living in the house, you’re still on the hook for half the mortgage payments, half the taxes, half the insurance, half the repairs and maintenance, and so on.
If something happens to the property, you’re still responsible.
You’re also responsible if your former spouse doesn’t hold up their end of the bargain, whether they’re living in the house or you are.
What do you do if your former spouse doesn’t pay their share of the mortgage, taxes, or insurance?
How do you get your former partner to pay their share of repairs and maintenance? And who’s responsible for performing all that upkeep?
In short, if you agree to co-ownership of the house, you need to be prepared to assume 100% of the responsibility if worse comes to worst. The ongoing liability is real.
Emotional Reasons to Sell
Finally, and most important for some divorcing couples, there are emotional reasons for selling the home the two of you previously shared.
Memories of past times, both good and bad, can shade your future enjoyment. You may not want to be reminded of your ex every time you walk into your bedroom or kitchen.
You may want to just put the past behind you and move on to a new home. That’s a natural and understandable emotion, and a good enough reason to put your former home up for sale.
How to Sell your House During a Divorce in California
If you’re going through a divorce, selling your house is a challenge—a bigger challenge, perhaps, than other married couples face.
On one hand, selling a house is selling a house, no matter what the status of the sellers. On the other hand, the selling process is more complicated when the sellers are going through a divorce.
1. Agree to Sell
When it comes to selling your house during a divorce in California, the first thing you need to do is agree to sell.
It won’t do if one of you is opposed to sale or on the fence. You have to agree that selling your house before your divorce is finalized is the best option for both of you.
This is not a decision you can make casually.
When you’re going through a divorce and selling your home, you have to take into consideration everything that follows from a sale—each of you finding new places to live, moving out (and separating) all of your furniture and personal belongings, and, if you have children, getting them situated in a new neighborhood and possibly a new school.
Think through all the options and all the challenges then come to a mutual agreement. Try to keep your emotions out of it, as much as possible. You and your spouse will need to work together to make a sale happen.
2. Decide How to Split the Proceeds
At some point in the process—the earlier, the better—you’ll need to determine how you’ll split the proceeds from the sale.
This may be a simple and amicable decision to split the profits (and associated costs) 50/50, or it may be a more contentious negotiation around a more complicated division.
In any case, it’s best to do this before you list the house, not after it’s sold.
California is a community property state, which means that all the property you acquire during a marriage is deemed to be equally owned by both spouses.
In essence, your house is jointly owned by the two of you, which should equate to a 50/50 split of all proceeds when you sell the house.
This can be complicated if you have a pre-nuptial agreement, however, an aggressive spouse might challenge an equitable split.
This sort of situation often requires the involvement of your individual divorce attorneys.
If you can’t come to a mutual agreement, you may end up in court with a judge deciding for you. It’s better if you can work the details out between the two of you before you’re knee deep in court proceedings.
3. Decide on the Best Timing
Once you decide to sell your home, you have to determine the best timing. You can opt to sell your house:
Adding to this decision is the fact that selling a house is easier during certain times of the year. In most parts of the country, it’s more difficult to sell a house during the winter months, especially when children are still in school.
No one likes to have their kids change schools if they move in the middle of the school year. If you can time your listing to hit in the spring or summer, chances are you’ll have more and better offers.
3. Prepare to Sell
Selling a home is a lot of work. Before you list your home, you have to do a lot of preparation, including:
You or your spouse may also need to find alternative living arrangements when the house is on the market. Everyone needs to be out when the home is being shown and during open houses.
Stressed About Selling Your House?
Selling a house in California is a stressful process. If you need speed and a guaranteed sale without the stress, hassle and headache of a traditional listing, we can help. Contact us below to receive a guaranteed all cash offer within 24 hours.
5.Contact a Realtor
As you’re appraising your home’s value and considering what you have to do to get it ready to sell, you also need to find a real estate agent.
While you can opt to sell the house yourself (and save the agent’s fees), in most cases, a professional realtor will help you sell your house faster and for a higher price than you can manage on your own.
The realtor you choose needs to be someone you and your spouse both trust—and ideally, someone familiar with selling homes for divorcing couples.
It’s also good to choose a realtor with experience selling your type of property in your neighborhood. They’ll have the best leads.
6. List the House
As you’re appraising your home’s value and considering what you have to do to get it ready to sell, you also need to find a real estate agent.
While you can opt to sell the house yourself (and save the agent’s fees), in most cases, a professional realtor will help you sell your house faster and for a higher price than you can manage on your own.
The realtor you choose needs to be someone you and your spouse both trust—and ideally, someone familiar with selling homes for divorcing couples.
It’s also good to choose a realtor with experience selling your type of property in your neighborhood. They’ll have the best leads.
7. Accept an Offer
Sooner or later, a prospective buyer will make you an offer for your house. If the market is hot, you have multiple offers. That’s a good thing.
Know that in some markets, you may get an offer below your asking price. In other markets, you may have buyers willing to pay a premium above what you’re asking.
In any case, you’ll need to come to a mutual decision as to which offer to accept and what selling price is acceptable. It’s possible, even likely, that you and your spouse will have differing opinions on this matter.
One of you might be willing to accept a lower price to sell the house faster, while the other might want to hold out longer to get a higher price.
It’s best if the two of you agreed in advance on a price you’re both willing to settle for, but if not, be prepared to compromise. Your realtor and your divorce attorneys can probably provide good advice, too.
That said, in most divorces, a quick sale is better.
That’s because you want to complete the sale before the divorce is final to take advantage of the aforementioned tax benefits. It’s also good to get the sale behind you so you can concentrate on the divorce itself and move on from it.
An Easier Option
If you don’t want to go through all the hassle of getting your home ready for sale, making expensive repairs, upgrades, choosing a realtor, and waiting out the lengthy sales process, consider accepting a fast and fair cash offer on your home from SoCal Home Buyers.
We take all the hassle out of selling your home, which is especially important for divorcing couples.
When You Accept an Offer from SoCal Home Buyers You Get:
You don’t have to wait out endless showings and hope for a reasonable offer. We guarantee you a fair price and pay you in cash.
We make it all happen in a matter of days, not months, which is important when you need to move fast during a divorce.
When everything else about your split is stressing you out, we take this one huge issue off your plate. SoCal Home Buyers is experienced in assisting homeowners facing divorce.
We help make selling your home a fast and painless process. Contact us to learn how we can help you during this trying time of your life.
