Should You Sell Your House Before Filing for Divorce? The Pros and Cons

Imagine standing in your once-cherished home, memories filling your mind. The thought of divorce weighs heavily. What is going to happen to the house in the divorce? You wonder, should you sell your house before filing for divorce? This choice is filled with emotional and financial challenges, affecting your future.

Selling a house before or during a divorce is complex. It involves emotions, finances, and legal issues. It changes what you've built together, impacting your living situation, finances, and family.

Your home is often the biggest purchase you make. Selling the marital home before divorce can help with capital gains taxes but and market timing, but there are things to watch out for.. Let's look at the pros and cons to guide you through this tough time.

Key Takeaways

• Selling before divorce can simplify asset division and reduce legal costs
• Timing is crucial to maximize financial benefits and minimize tax implications
• The sale can provide a clean break but may also cause emotional stress
• Privacy concerns and market perception can impact the selling process
• Proper planning and cooperation are essential for a successful pre-divorce sale

Is It Common to Sell a House Before Filing for Divorce?

Selling a house before divorce is becoming more popular. Many couples do this to make divorce easier and protect their money. Experts in family law suggest it to avoid fights over property and get the best value for the house.

In Texas, where property is shared, there are some considerations to keep in mind if you decide to sell the home. After a divorce petition is filed, selling the house requires both sides to agree or a court order. This makes selling before filing a good choice for many.

Many divorcing couples find that going through the divorce is difficult enough as it is and decide to sell the house after divorce.

The real estate market also affects this decision. For example, in San Antonio, it's becoming a buyer's market with higher inventory and price changes. This market is staying steady for now and could push couples to sell before divorce to make more money before the market declines.

According to Redfin's Texas Housing Market report, "In August 2024, home prices in Texas were down 0.26% compared to last year, selling for a median price of $348,600. On average, the number of homes sold was down 8.7% year over year and there were 27,921 homes sold in August this year, down 30,565 homes sold in August last year. The median days on the market was 50 days, up 13 year over year."

Divorce trends show couples often put the sale money in a joint savings account, after they sell their home. This way, they can divide assets fairly in the divorce.

Remember, selling a house before a divorce means you'll have to pay capital gains tax. The tax rules differ for single and joint filers.

The rules for capital gains are as follows for a homestead:

• Single filers: Tax on gains over $250,000
• Joint filers: Tax on gains over $500,000

This is good to keep in mind if these numbers will affect your tax burden at the end of the year. This is why some people prefer to have the home sale before divorce is finalized.

The Benefits of Selling Your House Before Filing for Divorce

Selling your house before filing for divorce can offer several advantages. Let's explore these benefits in detail.

Maximizing Financial Outcomes

Selling your house before divorce can lead to better financial outcomes. The current real estate market is holding somewhat steady but some think it will decline.

This situation allows you to sell your home for more than you might be able to a year from now. A real estate agent can help you determine the optimal property value and navigate the selling process.

Simplifying the Divorce Process

Selling your house before divorce can simplify asset division. It turns a complex asset into cash, making it easier to split during the divorce settlement. This approach can reduce legal fees and potential disputes over property value. Having the future sale written into the divorce decree can prevent delays in finalizing the divorce.

According to Thornton Esquire Law Group, "After both parties have had the chance to respond, many divorces move toward negotiation. This can involve informal discussions, mediation, or even collaborative divorce practices. Finding common ground can expedite the process and minimize court involvement."

It can be difficult to determine the true value of a house when figuring out how much will be split. If you sell the home during a divorce, you know exactly how much money will be split. This will take some guesswork out of the equation and make both sides feel they are getting a fair deal.

If one spouse gets the house but cannot make payments, you could find your credit being destroyed.

Emotional Advantages of a Clean Break

A clean break can provide emotional relief. Selling the house allows both parties to move forward without lingering ties to shared property. This fresh start can be particularly beneficial if the home holds difficult memories.

• Take advantage of the $500,000 capital gains tax exemption if still married at sale time
• Alleviate shared mortgage debt and home expenses
• Avoid potential lowball offers from buyers aware of the divorce situation

Remember, each divorce case is unique. Consult with a seasoned divorce attorney to determine the best strategy for your situation, considering factors like children's needs and market conditions. Selling before divorce can maximize your equity and simplify the process, but it's crucial to weigh all options carefully.

Potential Drawbacks of Selling Before Divorce

Selling a house before divorce is final can lead to unexpected challenges. The real estate market can change, affecting the property's value. This can impact the financial outcome for both parties.

Divorce proceedings can get more complicated when a major asset like the family home is sold. This can make the process longer and more expensive.

Family stability can be affected when selling a home during divorce. Children may struggle with losing their familiar home. This can add emotional stress to an already tough situation.

Legal issues can arise if one spouse disagrees with the sale or its terms. In Texas, property bought during marriage is seen as community property. This means both spouses must agree on how to divide it. This can lead to long negotiations and higher legal costs.

• Delayed divorce process due to lengthy property sales
• Risk of receiving lowball offers if divorce becomes public knowledge
• Uncertainty of future living arrangements adding stress

The timing of the sale is also important. Selling too early might mean missing out on better offers. Waiting too long could make the divorce process longer. Finding the right balance requires careful thought and sometimes professional advice.

You also will not be able to buy another house until after the divorce is completed due to the community property situation.

Options For Selling Your House Before Divorce

The divorcing couple has a few choices to think about when it comes to selling a house during divorce. Each option has its own good and bad sides. Let's look at the main ways to sell your property during this hard time.

Using a Real Estate Agent

Many couples choose to hire a real estate agent. A divorce real estate expert can help with the complex process of selling during a split. They can help get the best price for your marital property and handle negotiations. This way, the process can be smoother and you might make more money.

Selling FSBO

FSBO, or For Sale By Owner, is another option. This way, you can save on commission fees. But, it means you'll have to do more work. You'll need to handle marketing, showings, and paperwork yourself. It can be hard if you and your spouse aren't talking well.

Selling to Cash Buyers

Cash buyers offer a quick and private sale. If you do a Google search for 'Local cash house buyers near me', you will find several to choose from. This can be good if you want a fast solution. The process is simpler and faster than traditional sales. But, the offer might be lower than the market value. You need to think about how fast you need the sale and if you're okay with getting less money.

• Real estate agents offer expertise but charge commissions
• FSBO saves money but demands more time and effort
• Cash buyers provide speed and simplicity but may offer less money

Choosing the right method depends on your situation. Think about your time, energy, and financial needs when making this important decision for your best interest.

Financial Implications of Selling Your House Before Filing For Divorce

Selling your house before filing for divorce can have big financial effects. In California, couples can split the sale's net proceeds 50-50. This makes dividing the equity easier and helps with a smoother financial transition.

There's also a tax benefit to consider. Married couples can avoid up to $500,000 in capital gains tax on their primary home. For single filers, the limit is $250,000. Selling before the divorce can save you money on taxes. It's important to plan your finances well to take advantage of these benefits.

The timing of the sale can also affect other divorce finances. It might change how much alimony and child support you'll pay. Plus, selling early can get you a better price for your home. Homes sold early in a divorce often get higher prices and have smoother sales.

When dealing with these financial issues, consider a Certified Divorce Real Estate Expert (CDRE). They can help with mortgage and tax advice, and overall financial planning. Selling before divorce can give both parties a fresh start financially.

If you would like a cash offer to consider to see how much the property division will net each spouse, give Danny Buys Houses a call. They can make a no-obligation cash offer within 24 hours. This will allow you to sell the house as is and close within a week if needed.