Divorce For Homeowners: What I Wish I Knew

by MATTY BYLOOSFEBRUARY 19, 2016

Divvying Up the American Dream

It’s not a situation that anyone wants to face, but these days, divorce is all too common. Splitting up with your former partner can be a very stressful time, even in the most amicable partings. And if you co-own a home with your spouse, it’s a safe bet that the situation will be even more trying for both of you.

Let’s discuss the finer points of dealing with homeownership when you’re going through a divorce.
Male hand pushing a wedding ring over to a female hand about to sign divorce papers. Conceptual of divorce or marriage.

Know Your Options

You’re well acquainted with the standard narrative, but you have several options when deciding on the best course of action.

One of the most common choices is for one spouse to buy the other out. If you choose to go this route, you’ll both have to agree on a fair price, but that doesn’t necessarily have to be market-based; you can also choose to base the buyout price on your individual financial circumstances.

You and your former partner may also choose to sell the house and split the profits. And, assuming the house can legally be considered a primary residence, you can pocket up to $250,000 without having to pay taxes, if you’re filing separately. File jointly, and that number jumps to $500k.

You could also mutually decide to defer the sale until a later date, allowing one of you to stay in the home. This is an attractive option if you have children, as it gives them a sense of stability during a trying emotional time. But if you’re the one vacating the home, you’ll want to stipulate that the home is still legally considered your primary residence in the divorce agreement. That way, you’ll still be able to take advantage of the previously mentioned $250k in tax-free sale proceeds when it’s finally time to sell.

Alternately, you could choose to share the home with your former spouse – an unrealistic prospect for some, but a sensible choice for others. If the divorce is friendly and mutual, you could be roommates until your children are grown, then sell the home, allowing you both to take full advantage of the substantial tax benefits that homeownership provides.

Don’t Get Emotional

Keeping your emotions separate from the decision-making process can be near impossible if the divorce is a contentious one, but if you can manage to treat the sale of your former mutual home as a business transaction, you’ll both be better off in the long run. Don’t be tempted to make poor financial decisions out of malice. If you do, you may end up cutting off your nose to spite your face, so to speak.
Divorce - Sad young couple holding billboard sign with break love heart concept for divorce

Hire a Real Estate Agent

If you do decide to sell your home, it’s a good idea to enlist the services of a professional real estate agent, whether you’re selling to your former spouse or to the general public. A word to the wise – it may be best to hire an agent with no personal connection to either party, even if one of you happens to be friends with an excellent Realtor.

The last thing you want is for your agent to be caught in the “taking sides” arguments that sometimes happen when couples split, and you certainly don’t want either party to feel like their agent is in cahoots with their former spouse. In a perfect world, the real estate agent should be neutral.

Create a Pricing Strategy

Your pricing strategy will depend on your goals. If you’re on good terms with your ex, then you may want to price the home at the going rate for similar properties in your market. If you’re more interested in getting out from under your mortgage as soon as possible, then a more aggressive pricing strategy may be a better choice. Again, the expertise of an experienced Realtor should come in handy in this part of the sales process.

Set the Stage

You probably have plenty of memories tied to your former home – some good, and others you might rather forget. But it’s important to bear in mind that your old house’s next chapter will be written by new authors, and it’s in your best interest to make sure they start with a blank page.

All metaphors aside, don’t leave any evidence of your personal lives where potential buyers may see it, and do your best to stage your home so that it seems welcoming and full of possibility.

Onward and Upward

If you’re reading this article, there’s a good chance that you’re going through a pretty rough time. For what it’s worth, we’d like to wish you a speedy and profitable sale and a rich, bright future. Here’s to your next adventure!