Pay It Off Or Get A Short Sale
While you have many choices, the best option is to sell. Holding onto the home doesn't help in moving on. However, it might not be so easy in the current market, especially if you owe more on the mortgage than your house is worth. If this is the case, you'll need to pay off the difference on the loan or go for a short sale.
Issues With Short Sales
The downside of a short sale when you divorce selling a family home is that both of your credit scores are impacted. In addition, you both could still be responsible for the difference the house sells for and the amount still owed on the mortgage. However, the bank could always decide to release you from the liability during the short sale.
Refinancing Your House After Divorce
Attempting to refinance your house after a divorce is another option as long as you're not underwater on the mortgage. This only works as long as one of you agrees to let go of the house and the other, who's refinancing, has good credit and income. If you plan to keep the home, you'll want to make sure you can afford all of the expenses on your own.
One Spouse Keeps The Home
If your spouse keeps the home, don't expect it to be smooth sailing in getting a mortgage for another home. Sometimes, it's not so easy getting your name off a mortgage and qualifying for a second mortgage can be tough unless you have a high income. Your spouse might have to apply for another mortgage just so you can get your name off of it.
Consider Where You Are Going To Move To
Another thing to consider when selling a house during divorce is housing options in the community where you plan to live. If you decide to buy another home or rent, will your monthly payments be more or less? If you have kids, can you find similar housing in the same school district? What about the costs of moving or even renting a storage unit?
Consider Where You Are Going To Move To
You may be in love with your house now and want to stay, but what if during the next two years you must sell it? Delaying could lead to expensive capital gains tax. It might be better to trade the house for other assets.
As if selling a house during divorce isn't stressful enough, selling assets before a divorce can also be challenging. If not done correctly, there could be serious tax implications. Liquidating assets, though, should be a last resort due to taxes.
However, if you do liquidate assets, make sure you know what you're dealing with when it comes to investable assets and the costs associated with it. Also, know the cost of a real estate asset and what the capital gain will be when you sell the house. Get a good business valuation and appraisal for any collectibles you may have. Don't liquidate a 401K or fail to get fair price when you sell an asset. When selling a house during a divorce, again, you also don't want to acquire a huge capital gain with what you sell.
Keep in mind, you don't have to worry about taxes if you transfer assets back and forth with your spouse. Collaboration is when you and your spouse decide what something is valued at. In most cases, a judge does not get involved.
Do You Live In A Community Property State
Another question to ask while selling a house during divorce is whether you live in a community property state. There are only nine of them: Arizona, Idaho, California, Louisiana, New Mexico, Nevada, Texas, Wisconsin, and Washington. In a community property state, all assets acquired by you and your spouse are divided equally at the time of divorce. No other factors are taken into account. The rest of the states have equitable distribution which allows divorce courts to take factors into consideration such as length of marriage, ages, health, and the fact that one parent might have stayed home to take care of the kids.
