Selling before or after divorce

Should you sell your house before or after a divorce?

Like so many questions in divorce, the question of whether you should sell your house before or after your divorce is best answered with “it depends.” It depends on the financial situation of both you and your spouse, as well as tax implications and the condition of the housing market.

According to media reports, the local housing market surged in February: sales increased 13 percent and prices were up 9.6 percent over 12 months – a record high. But housing data has a built-in lag, so while the February numbers were great for sellers, there is no guarantee today in October or in coming months that the boom will continue. Divorcing homeowners need to consider how much they would net if they sold their house today and then make their best guess about how much you’d net in a year or so.

Pros and cons of selling before the divorce

• Pro: You don’t just end your marriage with a divorce, you start a new life – a new life in which you’ll need to pay for a new place to live. Because California’s a community property state, each spouse owns half of the assets such as a house, acquired during the marriage. If there’s substantial equity in the house, your share could provide the funds needed to get you started in your new life.

• Pro: the sooner you sell, the sooner you can begin to let go of the past.

• Con: a residential real estate sales site points out that if you decide to sell before the divorce, a slow sale process could complicate matters. Every home seller would love to sell quickly and easily, but that is often simply not how it happens in real life. If the relationship with your soon-to-be-ex is contentious, there might be sale-delaying disagreements over price, agent, property enhancements and so on.

Pros and cons of selling after the divorce

• Pro: selling your house after the divorce allows time for improved communications with your former spouse. Time can help to heal wounds, so a combative relationship might become less so after divorce issues have been resolved. Also, a sale after the divorce means the house can no longer be a weapon in those proceedings, which might also help to foster the cooperation needed to sell the property.

• Con: a residential real estate sales site points out that the longer the sale is put off, the longer you are tied to your ex. Consider: though you will no longer be married to your ex, you’ll remain married to your mortgage until that sale is final. Until the house is gone, you and your former spouse will have to cooperate on making mortgage payments, upkeep, utilities and so on.

• Con: the possibility of a painful capital gains tax. After a divorce, each party can exclude up to $250,000 gained on the sale of your main residence from the capital gains tax. You must have lived there for at least two of the five years prior to the sale. So if you move out and the sale is delayed several years, you could wind up losing that substantial capital gains exclusion. Factor in the timing when you and your attorney are negotiating the property settlement.

If you have any further questions please do not hesitate to contact us 714-671-8151