Can You Sell Your House Before the Divorce is Finalized?
You are allowed to sell your home before your divorce is finalized, but you need to obtain mutual agreement from both spouses and acquire court orders to accomplish this. Although it is a common technique to facilitate the division of assets and create a clean break between spouses, it may also involve some risk if it is not managed well, for example, in terms of tax implications or money allocation. Here is a detailed guide to selling your home before your divorce is finalized, from a legal, financial, and procedural point of view.
What are Legal Requirements Associated with House Sale During Divorce?
In cases where a divorce is in process, the sale of a home is usually regulated in such a manner that the financial and housing rights of both spouses are protected. In most cases, it is not possible for one spouse to sell the home without the consent of the other spouse or without a court order.
- Mutual Consent – In cases where the home is jointly owned or is considered marital property (i.e., it is owned by the couple), it is usually necessary for both spouses to agree in writing for the sale of the home.
- Court Order – In cases where one spouse is unwilling to sell the home, the other spouse can apply for a court in order to force the sale of the home.
- Automatic Restraining Orders – Once the divorce papers are filed, many jurisdictions have automatic temporary orders in place that bar both spouses from transferring, concealing, and selling any marital assets, including the home.
- Matrimonial Home Rights – If the home is registered in the name of only one spouse, the other spouse still has the right to reside in the home. Because of this, the home cannot be sold without the consent of the other spouse.
Advantages of Selling Your House Before the Divorce Finalized
The sale of the marital home during the divorce has several advantages for divorce couples. It makes the division of property easier and provides more independence for the divorce of spouses.
- Simplified Division of Assets – The sale of the home and the conversion of the asset into cash make the division of property easier. It is easier to divide the cash than the home.
- Tax Benefits – The sale of the home during the divorce while still legally married provides several tax benefits. Couples filing a joint return are allowed to exclude up to $500,000 in capital gains. Singles are allowed to exclude only $250,000.
- Reduced Conflict – The sale of the home may also remove one of the most contentious assets, which may help to reduce conflict between the two parties.
- Financial Flexibility – The sale of the home also provides each spouse with access to home equity, which may be beneficial to each of them individually.
Key Risks & Considerations
Although selling the marital home during divorce has its advantages, there are several risks involved that should be taken into consideration by the couple. Understanding the potential challenges can help the couple avoid the problems that may arise during the divorce.
- Proceeds in Limbo – If there is no prior separation agreement, the sale proceeds will be put in trust by a real estate attorney until the final divorce settlement is made.
- Improper Valuation – If the couple sells the property too quickly without consulting an appraiser, they might accept a price that is less than the actual value of the property.
- Damaged Credit – If the property has to be sold at a lower price than the mortgage loan outstanding on the property, it can affect the credit ratings of the couple.
- Delayed Finalization – If the property takes too long to be sold, the divorce process will be delayed as well.
Sell Your House Before Divorce is Finalized: Key Steps & Strategies
Selling a marital home before a divorce case is finalized involves a process that helps protect both parties’ interests while avoiding any complications during the case. A series of steps can be followed to avoid any potential complications, disputes, financial mistakes, and legal issues.
- Consult an Attorney – It is not recommended to sell a marital home without consulting a lawyer, as a divorce lawyer can provide valuable advice regarding any legal restrictions while protecting your interests during the process.
- Get a Formal Valuation – A property valuation, also known as a Comparative Market Analysis (CMA), can be obtained instead of relying on estimates of the property’s worth.
- Hire a Neutral Agent – It is recommended that a real estate agent who has handled cases involving divorce or contentious sales be appointed in order to ensure a neutral position and handle communication between the parties.
- Create a Written Agreement – A written contract for the sale needs to be drawn up, including the price at which the property is to be sold, any repair obligations, and the the way the sale proceeds and debts are to be divided.
- Use a Specialized Solicitor – A conveyancing solicitor who has handled cases involving divorce needs to be appointed in order to hold the sale proceeds in trust until the settlement is arrived at.
Alternatives to Selling Immediately
If the above option is not the best, then there is an alternative.
- Buyout – One spouse buys the other spouse’s equity and the mortgage.
- Temporary Co-Ownership – The two individuals continue to own the house and wait to sell it when the kids finish school.
- Deferred Sale (Mesher Order) – The court makes an order that the house is not sold until some agreed-upon date, which is usually when the kids finish school and can be left in the home.
Conclusion
Selling your home prior to the divorce is finalized can be a viable means of alleviating the complexities associated with the division of the property and the financial burdens that can result from the divorce. It is therefore important for the couple to ensure that the laws governing the sale of the property have been observed and that the sale is conducted in a systematic way to ensure that the couple is able to resolve one of the most complex issues in the divorce.
Frequently Asked Questions