After you and your soon-to-be ex-spouse conclude that a divorce is inevitable, you’ll instantly realize that a new decision needs to be made. Assuming you own a house, somebody is going to move out of it, and you’re going to have to decide whether to sell it — or not.
There’s no right or wrong answer to whether you should sell or keep a house during or after a divorce, and what you decide depends on factors such as the personalities of you and your partner, whether the house is in both of your names, if there are children involved and what the attorneys or court hashes out. In any case, there are plenty of issues to think about.
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You could sell the house later. That is, much later. Frequently this happens if the couple has kids and both parents agree that the house shouldn’t be sold — yet.
“In many cases, you can pre-agree to have the equity be split upon the sale of the home and let one spouse remain in the home especially if it is going to affect the kids,” says Ted Jenkin, a certified financial planner and co-CEO and founder of oXYGen Financial, a financial advisory firm that focuses on Generations X and Y and has offices in Alpharetta and Atlanta, Georgia.
But Jenkin says there’s a trap the remaining parent, usually a mother, should be aware of. “Most women negotiate for the home rather than cash — and then find themselves house-rich and cash-poor once child support and alimony run out, so it’s best to plan for that if you decide to keep the home,” Jenkin says.
If you can hold off selling or making any decision related to your home for a while, that’s not a bad idea, says Alexis Moore, a real estate broker and family law attorney in El Dorado Hills, California.
“Divorce itself is enough of a burden without adding real estate in to it and a sale to boot,” she says.
If you can do it when both individuals are acclimated to their new life, you’ll have a better idea if you should sell or not, Moore says.
But if you don’t have the luxury of time and need to sell immediately? Moore sees a silver lining. “There’s nothing worse than trying to start over after a divorce in the same house you and your ex lived in,” she says. “A fresh start and new beginnings are often the best way to go forward for some people.”
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You could try nesting. This is one of those ideas that sound so crazy, it might actually work, and it can — if you and your ex get along.
Amy Saunders, a family law and divorce attorney with Legal Solutions Group in Dedham, Massachusetts, says that some couples will do what’s called nesting. The kids live in the house, she explains, and the parents take turns living there. Where does the other parent live while one parent is in the home? Often in an apartment that the divorced couple rent, splitting the costs.
“This isn’t a good long-term strategy,” Saunders says. “Ultimately, one person will have to buy the other out of equity or sell and divide the home.”
Indeed, it sounds like a terrible long-term strategy, but it might be an excellent short-term one: Catch a breath for a year or so, get used to a new normal and figure out what your next step is.
It may benefit you both to sell. David Crouse, a family law attorney in Spokane, Washington, points out that there’s the “cost of sale” for your home. He points out that when you sell a house, you give a commission to the real estate agent, and there are other expenses, like making repairs to the home before you sell. Those costs generally average to about 10 percent of the sale price, according to Crouse.
So he says that if you sell a $300,000 home together, you both split the profits and divide the $30,000 of expenses to sell your home. If you buy out your spouse and end up selling the home soon after, you’re paying $15,000 more than you needed to.
“You don’t want to keep the home if you have a likelihood of sale within a few years,” Crouse says.
You could also take a bath in taxes, if you sell the house solo, according to Jeffrey Schneider, a Port Saint Lucie, Florida-based enrolled agent and certified tax specialist. An example Schneider provides is that a divorcing couple could sell a home for $700,000, generate $450,000 in profit and avoid taxes on their joint tax return. Meanwhile, if a divorced individual, having bought out the ex, later sold the same house on his or her individual tax form, he or she could be saddled with $40,000 in taxes.
Do you plan to remarry? It’s a question you may want to ask yourself if you’re leaning toward selling and searching for reasons to move out.
If you believe another marriage may be in your future, Crouse wonders: “Does your new spouse want to live in the home you shared with your prior spouse? Probably not.”
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Even if your ex is fine with you keeping the house indefinitely, can you afford to? Unless the house is paid off, you have the mortgage payments. You also have maintenance costs.
That’s something to consider if you and your partner are going to sell the home after the kids move out, Saunders warns.
“Who pays for major repairs and improvements?” she asks. “Who gets the mortgage interest deduction?” If you don’t discuss that beforehand, you could be arguing about it later — and you’d probably like to be done with arguing.
There are other considerations. “If this was a one income home, the spouse who is not a worker will have to rely on alimony to support the home. Alimony is not always forever,” Schneider says.
Schneider also points out that your ex may want to get off the mortgage, and you may have to apply for your own.
“That may be problematic if the new owner has little income,” Schneider says.
He adds that some parents will try to make mortgage payments work by patching together money from alimony and child support, but alimony can run out, and children grow up. Moving out may be inevitable.
And it may be fine with you, if the kids are out of the house. But one thing is for sure when it comes to being divorced: Keeping a house maintained on your own is a lot of work — but sometimes just keeping it is even harder.
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Divorcing? Should You Divorce Your Home, Too? originally appeared on usnews.com
