Considerations When Selling Your Home After a Divorce
“I’m keeping the house!” is a cliché in Hollywood movies, but in real life, many people choose to sell the family home and split the proceeds from the sale.
Selling a home after a divorce is a complex decision. There are emotional, financial, and legal implications to take into account. In this article, we’ll walk you through key considerations when selling your home after your divorce.
Assess Emotional Readiness and Impact of Selling
Selling your home after a divorce only adds to the stress of the entire ordeal. Beyond the practicalities of selling, ask yourself whether you’re emotionally prepared for this step. For many, the family home represents years of memories and milestones, making the decision to sell both challenging and complex.
This emotional weight is even greater when children are involved. A family home may offer stability and comfort, especially during an already turbulent time, so it’s important to consider how this change might impact your children.
While it’s natural to feel an attachment to a home, especially one that has housed a family, transitioning away from it can be a powerful step toward personal growth and healing for everyone involved. Many people find that selling a home after a divorce is a healthy way to close a chapter and symbolically move on after the marriage.
Financial Considerations
From a financial perspective, selling your home is often one of the fairest ways to divide assets. While one spouse may wish to keep the home, selling can simplify the process and provide each party with an equitable share, reducing the potential for prolonged disputes over property value. By liquidating the home and splitting the proceeds, you can more cleanly move forward without ongoing ties to the property.
Was your home purchased before or during marriage?
In both Oregon and Washington, whether the home was purchased before or during marriage can affect how it’s treated in a divorce. Generally speaking, if the home was bought before the marriage, it’s considered separate property and belonging to the spouse who initially purchased it. However, if both parties contributed to mortgage payments or maintenance, even separate property may become partially marital (or community) property.
How will sale proceeds be divided?
In Oregon, assets and debts are divided equitably rather than equally, which aims to ensure a fair distribution based on each spouse’s financial contributions, needs, and overall circumstances. Because this process considers various factors, you might receive a different share of the proceeds than your former spouse. It also means that even proceeds from the sale of premarital property can be included when dividing assets – if deemed fair by the court.
Meanwhile, Washington is a community property state, which means that if your home was acquired during your marriage, the proceeds from its sale will generally be divided equally between you and your former spouse.
Tax Implications
No matter how the proceeds are divided, the sale of your home will also have tax implications. If your home has appreciated in value, selling could result in capital gains taxes. However, the IRS provides a capital gains exclusion for primary residences: you can exclude up to $250,000 (or $500,000 if filing jointly) of profit from your taxes if you meet the ownership and use tests. These exclusions may still apply post-divorce if you meet the requirements, so it’s wise to consult a tax advisor to understand your specific situation.
Legal Implications and Agreements
Carefully review your divorce settlement before listing your home.
Your agreement may outline specific terms about how assets, including the family home, should be handled. The settlement may stipulate a specific time for selling or allow one spouse to remain in the home temporarily. It’s also common for settlements to clarify each spouse’s share of sale proceeds, as well as any mortgage obligations or closing costs.
To avoid potential disputes, work with a legal professional to draft a formal distribution plan. Your plan should include details about each spouse’s share of the proceeds, any debts associated with your home, and responsibilities for closing costs. With a clear plan, you and your former spouse can confidently move forward with the sale of your home without having to get the court involved.
Market Fluctuations
You might be anxious to sell your home as quickly as possible after a divorce, but consider how current market conditions could impact how much you can sell it for. In a buyer’s market, where supply exceeds demand, you may need to price competitively to attract buyers, potentially affecting your proceeds. In a seller’s market, with limited inventory and high demand, you might receive stronger offers, increasing your profit.
A realtor with experience in post-divorce home sales can be invaluable here. They understand the complexities of selling during a divorce and can help you navigate the process. They can help you assess market timing, manage communication, and advocate for both spouses’ interests, ensuring the sale is as smooth and fair as possible.
Selling Your Home and Moving On
Selling a home after a divorce can be both a financial and emotional decision. Understanding the factors outlined above is key and can help you decide the best way to proceed. Remember that Oregon and Washington laws provide specific frameworks for property division that can significantly impact the sale’s outcome, so working with professionals can help ensure a fair process.
By assessing your emotional readiness, financial considerations, and legal requirements, you can sell your home in a way that aligns with your goals. And, remember that Gevurtz Menashe is here to guide you through the legal aspects of property division and support you in taking this important step toward a new beginning.
Speak With a Family Lawyer About Selling Your Home
For 40 years, Gevurtz Menashe has supported families through some of their toughest times.
If you need assistance navigating selling your home during or after your divorce, please call our office at (503) 227-1515 or contact us online, anytime.