Is It Better to Sell Your House Before or After a Divorce?

Benefits of waiting to sell a home after a divorce

More time to improve communications with your ex

Resentment, anger, bitterness, and vengeance are the four horsemen of home sale sabotage. So, if your spouse exhibits those indicators early in the process, it may be better to wait until after the divorce is finalized to sell the house.

The de-escalation of emotion and intensity is also likely to help you make smart financial decisions based on what will benefit you as opposed to what will hurt your ex.

Increase your home equity

Assuming your mortgage payments are made on time, and the house is well maintained, waiting to sell typically decreases your debt and increases your equity.

Even though the housing market occasionally tumbles, overall home values tend to rise over time. Typically, the longer you wait to sell, the more money you’re likely to get out of the home.

More time to create a relocation plan

Most divorcees are homeowners, and decisions regarding the family home can be highly contentious during divorce settlements. This is extremely common. According to Divorce.com, 67.4% of divorced individuals are homeowners, while only 32.6% are renters.

If your divorce situation — or a fast sale — dictates the need to vacate your home quickly, you may be forced to relocate temporarily to any place that’s affordable, available, and allowable (within the geographic bounds of your custody agreement). Later, you’ll end up spending additional time, money, and effort for a second move to a permanent residence.

Nationwide, local moves can range from $900 to $2,500, depending on the size of your home and belongings. For long-distance moves, that expense can increase to between $4,000 and $7,000.

Having more time to decide where to go and how to get there can be cost-effective and provide some sense of calm and control over your situation.

More time for your kids and other family members to adjust

Determining the best living arrangement for children and other family members depends on a variety of factors. And, it can take time to develop a plan that accommodates each generation’s needs. While children remain the top priority, approximately 60 million adults live in multi-generational homes.

The sale of the family home might cause your live-in grandma to get concerned about how she’ll make neighborhood bridge games or coffee klatsch. Your law student son might need to adjust his plans to find a clerkship closer to a new home in another part of town.

Sometimes, giving children, other adults — and yourself — the luxury of time allows them to adjust to each change individually instead of being bombarded with many transitions all at once.

Potential to make a less emotional, business-based decision

Since divorce and moving are each stressful in their own right, doing both at once may seem overwhelming. Once you’ve adjusted to a new life and routine, you may be better able to focus on the sale of your home.

Studies on how long it takes to get over a divorce have yielded inconclusive answers ranging from 18 months to half the number of years the couple spent together. The bottom line is it takes time to recover from the end of a relationship with your spouse — and maybe even your house, too.

If you wait until after the divorce is final and you have some certainty about your future, you may find it’s easier to let the house go on your terms and timeline.

Drawbacks of waiting to sell a home after a divorce

Holding onto your house keeps you tied to your mortgage and your ex

Unless the divorce decree forces the home sale during the proceedings, you’re still married to your mortgage even after you’re no longer married to your ex.

Just as the shared home is an asset, the mortgage remains a shared debt. If you both remain co-owners of the house after the divorce, you’re still responsible for paying the mortgage, utility expenses, maintenance, unexpected repairs, etc.

Co-ownership also has tax implications because you have to split property tax and mortgage interest tax credits.

Furthermore, the mortgage payments for the shared home are likely to limit the amount banks are willing to loan you to purchase a new home.

The potential of paying a hefty capital gains tax

You can only exclude home equity income from the capital gains tax if the house has been your primary residence for at least two of the five years prior to the sale. So if you’re the spouse who moves out — and the house doesn’t sell for several years — you may wind up paying capital gains on the equity.

To avoid that scenario, some divorce decrees include provisions that preserve that exemption for the sale of the home after the settlement. However, the greatest risk for inadvertently accruing an enormous capital gains tax comes from retaining a pricey property — either through a spousal buyout, refinancing, or trading rights to other marital assets — and later selling for a large profit.

Typically, as the sole owner of the home, you can exclude up to $250,000 from the capital gains tax — instead of that $500,000 you could have excluded if you’d sold the home during your marriage.

If negotiations turn contentious, your ex could sabotage the sale

Some divorcing couples opt to sell the house immediately and split the proceeds for a quick resolution because neither party wants to live in the marital home.

However, after a vicious custody battle or property dispute, your ex may be hostile enough to obstruct the sale. More than being simply time-consuming and frustrating, the bickering among sellers can sink a sale.

In the best-case scenario, “An experienced Realtor can communicate productively and establish expectations with both parties; make sure we compromise when necessary; sell the home quickly for the most dollars; and promote the correct distribution of funds after the sale,” explains Bremer.

Conversely, in the worst of cases, “We have somebody who’s occupying the house, won’t respond to our communication, bars anyone from entering the home, and [trashes] the property so that people don’t want to buy the house,” Bremer says.

Potential for a delay in receiving your share of proceeds

If you wait to sell the home until after the divorce, your home’s value may be higher or lower than it was when assets were tallied. For example, if you get a divorce in March, you are likely to benefit from the high peak of the spring market and receive a top-dollar offer.

However, if your spouse won’t consent to sell the home until November, “By then, the interest rates could change; the value might decrease; and there could be fewer people buying,” says Bremer.

In these situations, it pays to work with an experienced Realtor. “We need to consider how much money you’d net if you were to sell it today, and then estimate what you might get if you waited another year or so to sell,” says Fore.