According to studies done by psychologists, divorce ranks as the second most stressful life event. In addition, selling your home ranks in the top 30 most stressful life events. Going through both of these events at the same time, well, that can be a lot to handle. There are many options to consider when experiencing two of the most stressful events at the same time.
Mortgage Take Over
One of the first questions that arises when going through a divorce is "what should we do with the house?" Usually, desirability isn't the issue, both parties would love to keep the house. And while it may not be that difficult to take one parties name off the title, it is however a lot more difficult to take one's name of the mortgage. If the spouse who wants to take over the home has enough income, he or she could take over the mortgage and continue to pay the monthly payments themselves. This however is not the case most of the time. Most individuals do not have the income to do this and in turn will not qualify to take over the mortgage themselves. Also, one will end up having to answer the question of how much equity the departing spouse is to receive, which can get messy and end up in the need to consult a divorce attorney.
In addition to this, most couples underestimate what it is going to cost them to live on their own after the divorce is finalized. If you decided to keep the home, you need to really make sure you can afford the payments and cost to live on your own. I recommend developing a comprehensive budget if this is the option you chose.
Some couples with children decided that they will co-own the home with both parties staying on the mortgage (to avoid disruption with the mortgage company), with the spouse choosing to live in the house making the full payments (or whatever percentage they agree upon). This option however requires a great deal of trust and civility by both parties. It can get messy very quickly. If the spouse making the payments defaults on the mortgage, that will in turn effect the departing spouses credit as well. The departing spouse who is not living in the home anymore is still legally responsible in a lot of ways.
Selling the Home
Most divorcing couples do not opt for the options above and end up selling their home. There are actually a lot of benefits to this option. The biggest benefit is capital gains tax ramifications. Current law allows for married couples selling their home to exclude up to $500,000 in profit from the sale of their home. If you're single, the capital gains exclusion drops to $250,000. To be eligible for this exclusion you must have lived in the home (as your primary residence) for two of the last five years. This provides an enormous financial incentive to sell while still married (especially if the home has greatly increased in value). When it comes to more details regarding the tax break, I suggest one to consult an attorney or accountant.
There are also a lot of emotional based reasons to sell the home. Many couples underestimate the emotional issues that stem from keeping the property. Chances are, at one point you built a happy and fulfilling life in your home. However, memories from the good (or bad) times can end up tainting this image that you have on the house. Some people feel that living in the house reminds them of the feelings from the divorce every day. While this may be able to work for some couples, some have found that keeping the house was not what they had hoped it would be, and end up selling anyway.
So How Do I Go About Selling My Home?
The first thing I would suggest would be to decided together how the money from the sale will be divided up. This question can be solved and agreed upon through an attorney who will guide you through the process of deciding equity.
Once this is decided, I would bring on a reputable real estate agent to sell your home. I mean, you are selling your largest asset, so get the best agent around that suits your needs. This is not a decision to be taken lightly and I HIGHLY recommend doing your research beforehand. Do not just hire the first agent that you speak to because you want to "get this over with." Selling a home through a divorce requires superior communication skills by the real estate agent. Through most transactions, an agent will keep one spouse informed and trust that they will relay the information to their significant other. However, selling a home through a divorce requires an agent that is willing and ready to notify both parties of every detail regarding the sale of their home. I would bring on an agent that makes a point to have both spouses at every meeting, appointment, and a part of every decision. You want an agent that makes both parties feel equal in the sale, and that one spouse doesn't feel more favored than the other. More importantly, bring on an agent that will be PATIENT. A good agent will understand the emotional stress that you are dealing with and create an atmosphere of trust where either party can call at anytime.
When also interviewing agents, ask how they plan on selling the home. A good agent will coordinate everything for you, from appointments, to photography, to staging if necessary. They can also put you in contact with other vendors that you may need, painters, movers, cleaning services, etc. A divorce is already stressful as it is, let a top agent help you with some of the smaller details that can become overwhelming if tackled all at once.
Lastly, I would suggest to not say the following statement to any one other than your agent, "I'm selling this home because I am going through a divorce". Buyers may assume that you want to sell quickly and may offer less. Try something along the lines of "I am downsizing" or "I am relocating within the area." Don't lie, but take a more positive stance on the situation.
In conclusion, when making a decision during a divorce to sell the house or not it can be very easy to let the emotions overwhelm us and steer our decisions. The answer whether to sell or keep the house is not so clear cut. It will vary by couple and financial situations. While no option is better or worse than the other, it is important to know that the feelings and stress one goes through during a divorce is normal. It is okay to feel like your world turned upside down, because well, essentially it did. Divorce and selling a home at the same time can be very tricky however there are people prepared to help you along the way.
About the author: Erika D'Argenio is a real estate agent in the South Florida area. As a former psychology graduate, and elementary school teacher in a title 1 school, she has extreme empathy towards individuals in emotional distress and superior communication skills. She has a passion for real estate and would love to share her marketing skills. She also strives to build life long relationships through her positivity, professionalism, and enthusiasm.