How to sell a house during divorce

Can I sell my house during a divorce?

Yes, but usually not alone. If both spouses are on the title, both have to sign the deed. Even if only one spouse is on the title, the house may still be marital or community property under state law, and the other spouse may have rights in it. Many states also put temporary orders in place once a divorce is filed that limit selling major assets without the other spouse's consent or a court order.

So the first step is to talk with your divorce attorney about what your state allows and whether you need a written agreement or a court order before you list or accept an offer.

If one spouse has already moved out, that spouse usually still has the same ownership rights and still has to sign. Moving out doesn't give up a share of the house. Likewise, the spouse who stays doesn't gain the right to sell alone. The deed, your state's property laws and any court orders decide who signs, not who's living there.

When to sell a house during divorce: before, during or after

There's no single right time to sell a house during divorce. The right answer depends on your finances, the housing market where you live, and how well the two of you can make decisions together. Each option has trade-offs.

• Before filing or early in the case: one less asset to divide, but both of you must cooperate on price, repairs and showings
• During the divorce: proceeds can be held in escrow until the settlement says how to split them
• After the divorce: the decree sets the rules, but you may stay financially tied to an ex-spouse until the house sells
• Some couples agree to delay the sale, for example until a child finishes the school year; the agreement should say who lives there and who pays what until then

Keeping the house vs selling it

Sometimes one spouse wants to keep the home. That usually means buying out the other spouse's share and refinancing the mortgage into one name, which requires qualifying on one income. If that isn't realistic, selling is often cleaner: it turns the house into cash that can be divided and lets both people move on.

Before deciding, the spouse who wants to keep the house should get pre-qualified for a refinance and add up the full monthly cost on one income: mortgage, taxes, insurance, repairs and utilities. If the numbers don't work, it's better to know before the settlement is signed. Remember too that removing a name from the deed doesn't remove that person from the mortgage; only a refinance or the lender's release does that.

How to sell a house during divorce, step by step

Agreeing on the process up front prevents most of the fights that stall a divorce sale.

• Confirm with your attorneys that a sale is allowed and what has to be in writing
• Get the mortgage payoff and check for liens, such as a home equity line
• Agree on how you'll set the price: an appraisal, an agent's market analysis or written offers
• Decide who pays the mortgage and upkeep until closing
• Choose how to sell and who will deal with the agent or buyer
• Agree on how proceeds are held and split, often through the title company's escrow

Splitting the money when you sell a house during divorce

At closing, the title company pays off the mortgage, any liens and the selling costs. What's left is the net proceeds. How they're divided depends on your settlement or court order and on your state's property rules. Some couples split evenly; others adjust for one spouse's separate contribution or for who paid the mortgage during the separation.

If you haven't finished negotiating, the proceeds can be held in escrow until you do. That lets the house sell on time without forcing a final decision on the split.

Ask the title company for an estimated settlement statement before closing so both of you see the same numbers: sale price, mortgage payoff, any liens, closing costs and the amount left to divide. Agreeing on that document in advance takes a lot of tension out of the closing table.

Taxes on selling the house during divorce

If the house was your main home, you may be able to exclude a large part of the gain from income if you meet the IRS ownership and use tests. Married couples filing jointly can usually exclude more than a single filer, so the timing of the sale relative to the divorce can matter. The IRS also has special rules that can help when one spouse moves out under a divorce agreement. A tax professional can tell you how this applies to you.

Transfers of property between spouses as part of a divorce generally aren't taxed at the time of the transfer, but the spouse who keeps the house also keeps its original basis. That can mean a larger taxable gain later. Ask about this before you agree to trade the house for other assets in the settlement.

Setting the price when you can't agree

Price is where many divorce sales stall. One spouse wants to hold out for top dollar; the other needs the money now. A neutral number helps. Options include a joint appraisal from an appraiser you both accept, a market analysis from an agent neither of you has worked with before, or written offers you both review at the same time.

Agree on the rule before you see the number. For example, you might agree to accept any offer above an appraised value, or to cut the price on a set schedule if the house doesn't sell. When the rule is set in advance, the decision isn't a new fight each week. Your attorneys or a mediator can help write it into the agreement so it's clear how you'll sell a house during divorce even if you stop talking.

What to watch for when you sell a house during divorce

Don't stop paying the mortgage because you've moved out; late payments hurt both spouses' credit while both names are on the loan. Keep communication about the sale in writing. Don't sign anything one spouse hasn't seen. And remember the house's condition: if neither of you wants to fund repairs or coordinate showings, an as-is sale avoids a long list of decisions you'd otherwise have to make together.

Be careful with wire instructions and closing paperwork. Divorce sales sometimes involve two attorneys, two email threads and a lot of forwarded documents, which is exactly where wire fraud happens. Confirm any payment instructions by calling the title company at a number you looked up yourself.

When a direct cash sale fits a divorce

Listing usually brings the highest price for a well-kept house, and if you both can cooperate through showings and negotiations, it's often the right choice. A direct cash sale fits when cooperation is hard, the house needs work, or you need a firm closing date. There's one written offer for both of you to review, no showings to coordinate, and no buyer's loan that can fall through.

It also helps when the house is a source of conflict in itself. Repairs that one spouse wants and the other won't pay for, a spouse living in the house who doesn't want showings, or a deadline in the settlement are all common reasons couples choose to sell a house during divorce for cash. The trade-off is price, so compare the offer with what a listing would net after repairs, commission and the months it might take.

How to sell a house during divorce with Prominent

Prominent Cash Offer buys houses directly, as-is, in any condition. If the property is a fit, both spouses receive the same written cash offer, so there's one set of numbers to review with your attorneys. There are no fees or commissions, we pay the closing costs, and you choose the closing date together. The title company can hold the proceeds until your agreement says how to divide them. There's no obligation to accept.