Disclaimer: This blog post is intended for informational and educational purposes only and is not dispensing or offering legal advice. If divorce is in your future we encourage you to seek experienced and professional assistance of a Divorce Specialist Realtor and an attorney about the legalities of keeping or selling your home in a divorce.
Welcome back to Part 2 of our blog on 6 Tips from Geni Manning, Geni Manning Real Estate Group, regarding real estate and divorce. In Part 1 we addressed the importance of choosing a Realtor that both parties can trust, why minimizing arguing and contention can lead to better outcomes and how the importance of believing the numbers.
In Part 2 we will wrap up the subject of managing the sale of a marital home during divorce, with or without children. This is a massive subject and cannot be fully explored in two blogs. See below for a way to obtain Geni's book titled 'Surviving Divorce, Your House and Your Money' - available in the bookstore on this website.
The following subject is important from a real estate marketing perspective as well as a financial for a divorcing couple. The additional burden of legal retainers and fees as well as the cost of standing up a separate household can be overwhelming to many couples who may have found themselves heading toward divorce because of the strain in their finances.
4. When One Spouse Moves Out
There are two points of view on this subject. Some believe, and this is truly an individual thing between spouses, that living with your spouse while you’re in the midst of a divorce is a terrible idea that’s practically guaranteed to end badly. Certainly, we would not support this if the relationship was abusive but there is another view worth considering.
The second viewpoint is that if both spouses are amicable and there is minimal animosity that both remaining in house together avoids a financial strain and the increased risk of credit issues. It also allows the couple to begin to address their debt and to separate co-mingled funds. This leads to an easier transition back to 'singleness.' If both are willing and able to keep the home in ‘show ready’ condition, then this is not a bad idea. An attorney can work out the details and obtain a Court Order addressing this separation period pending completion of divorce proceedings. If there are children in the home this can also be a stabilizing situation and help them acclimate to the pending divorce providing there is very minimal animosity in front of them.
However, if both parties are not able to manage maintaining a civil environment, children or not, and are both not willing to keeping the home in ‘show ready’ condition then the sale is likely to be bumpy and especially difficult with a less than desirable outcome for all.
There can also be another problem that we have seen many times; and that is when one spouse moves out the ‘missing spouse’ is obvious with the closet half-empty, pieces of furniture missing – perhaps a bed and bedroom suite gone. This is a clear signal to a buyer’s agent that this is a divorce situation, and it nearly always ensures a low-price offer not to mention that the ‘word’ gets around quickly there is a divorce. This can be quickly confirmed by looking at court filings with the county clerk of the court.
What if both parties move out? There are multiple reasons not to sell the house while it’s vacant:
Vacant houses typically take longer to sell; however, we have the capacity to make a vacant home look lived in - just ask!
They receive lower offers because the rooms look smaller than they actually are
You may have to pay for special vacant home insurance as empty properties attract crime
5. Consult A Tax Specialist To Help Maximize The Home Sale Proceeds
Most engaged couples are too infatuated with each other to really think about the tax benefits of marriage. However, when the infatuation is gone and divorce is nigh, couples should definitely consider the tax implications of the various ways to divide the home equity.
'It is extremely important that divorcing couples consider when and how they’re going to file their taxes for the year when they’re deciding when to sell the house,' advises Geni. 'Because there are different tax implications if they’ll still be filing jointly, or as separate households because a final Court Order on December 31 will mean that the according to the IRS both are "unmarried" for the entire year.' Refer to IRS Publication 504, "Divorced or Separated Individuals."
Hiring a certified tax specialist with divorce tax experience can:
Help you navigate how mortgage interest and real estate taxes will impact your divorce
Help with the timing of the sale to avoid paying capital gains tax (you can exclude up to $500,000 of the proceeds as a married couple)
In the case of a buy-out, help the person receiving funds to avoid paying capital gains tax on any home equity received because it’s part of the divorce settlement
Help with fringe cases, such as end-of-year divorces and deciding whether filing in the current year versus the next year has tax benefits in terms of the filing status.
6. If You’re Keeping The House
While there are plenty of emotional and financial reasons to sell the house during your divorce there may be some situations that may make sense to stay put and buy your spouse out. If you’re able to qualify for a mortgage with your solo salary, and your spouse agrees to a reasonable buyout amount, this can all be handled as part of the divorce proceedings.
‘A final divorce decree doesn’t mean that everything is complete,’ explains Geni. ‘The Order of the Court, or divorce decree, will state which spouse gets the house and the conditions of that transfer, if that is the arrangement. Your attorney prepares the paperwork to remove the other spouse from the deed – typically done with what is known as a “Quitclaim Deed.” If this quitclaim deed is not filed or filed improperly it will cause problems in the future when the house is put up for sale.” Sadly, some people mistakenly think that the divorce decree legally transfers the property, it does not. Regardless, you need to make sure it’s completed as soon as the divorce is settled.
Bottom Line: Listen to the experts to avoid common mistakes and pitfalls pitfalls. Selling a home as part of a divorce is difficult even in the best of circumstances. There are many pitfalls that can materially complicate the process and cost both parties thousands of dollars in extra legal fees and add months to the timeline. Remember, the legalities and tax implications, not to mention the expertise of a Divorce Specialist Realtor are invaluable in maximizing the sale price.
Use the Contact Us below to let us know your specific interests, so that we can contact you and be prepared to provide you with the help you need.
If you are thinking of, or in the middle of a divorce, we want you to know you're not alone and we’re here to help. If you would like to discuss how we can assist you with your future plans, please give me a call at 469-556-1185.
Geni Manning
Disclaimer: The information provided in this website and our blogs is not intended for legal, financial or mental health advice but is for general informational purposes only. While we endeavor to provide the latest information on a particular subject, future changes to the source Information is beyond our control.
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