Selling your house in divorce is rarely easy.
But making the decision to keep or sell may be easier, at least from a financial viewpoint, if you use these suggestions as a starting point for your decision-making process.
1. Know your real bottom line. Real estate agents may talk a big game when asked for opinions on the value of your house. Don’t be swayed until you know the real bottom line, your net dollars, and cents.
If you want to keep the house, you need to know exactly how much it will cost and whether you can afford it.
If you want to sell the house, you need to know what you will net or owe. You need to crunch the numbers. All of the numbers.
If you are contemplating keeping your house, to include not only the mortgage payments and property taxes but also the insurance, utilities, costs of repairs and maintenance and any other expenses that could rise if you keep the house, like the costs of commuting to/from work.
If you are contemplating selling your house during a divorce, know the sales commissions, transfer taxes, staging costs, moving costs, capital gains taxes, etc.
Put your numbers in writing so you won’t make mistakes or sugarcoat things. Our minds unconsciously focus on any facts that support our desired outcomes so we can get what we want. It’s called confirmation bias, and it sounds like the little voice in our heads that usually says things like, I can’t afford it but, it makes sense to keep the house so the kids can stay in the same school district.
If you want to keep the house, your brain can focus on the evidence that supports your belief that you can afford to keep it and ignore or minimize contrary data. Our minds are sneaky when we want something.
Spreadsheets and reports are beautiful tools for keeping your numbers straight and accurate. It’s hard to argue when the facts are in black and white.
When you know your real bottom line, it’s easier to make sound financial decisions despite any heightened emotions.
2. Hire a financial adviser, CPA and/or tax attorney to run and rerun the numbers to calculate your real bottom line. Ask your CPA or tax attorney to explain the tax consequences of selling and keeping your home. Common questions include whether you should defer the sale of your home, if you should sell during or after the divorce or legal separation, or if there are any legal ways to reduce your tax bills and any tax liabilities you may face if your house is underwater.
Regardless of whether you want to sell or keep the house, listen and weigh the experts’ opinions.
Getting expert advice is especially important if your spouse managed the finances or you’re not a numbers person. There’s no shame in either case.
The most important thing is getting sound advice and using it during the decision-making process.
3. If you want to keep your home answer these questions and any others that are relevant.
- How will you feel if you keep your home?
- Is keeping your home aligned with who you are and what you value?
- If necessary, are you qualified to assume or refinance your mortgage?
- Will you deplete your retirement, savings, investments, and/or emergency funds if you keep the house?
- Will your monthly income, excluding child support and modifiable spousal support, cover all of your expenses if you keep the house?
- Do you have assets you can easily liquidate in case of emergency?
- Do you have savings equal to one year of your living expenses?
- Is your work history long and stable?
- Could you be easily and quickly reemployed if you unexpectedly lost your job?
- Do you have/can you get disability insurance to cover your costs if you keep the house and get injured? If so for how long?
- Do you want to keep this house or do you want a home?
- Is keeping the house practical for your new lifestyle?
- Does/will your spouse object to you keeping the home?
4. If you want to sell your house answer these questions
and any others that are relevant.Will you hire a Realtor or go For Sale By Owner?
- Should you move out of your home once it’s listed for sale?
- Will you stage your house and how much will it cost?
- Are any repairs required before selling the house and if so, what are they?
- Where will you go?
- Will you hire movers?
- Do you need to put things in storage?
- Who will pay the ongoing expenses for the house while it’s for sale?
- How will the net proceeds be divided?
- What are the tax consequences of a sale?
- What are your risks if the total debt secured by the house exceeds the sales proceeds?
- Are there benefits to deferring the sale? If so, what are they?
- How will you and your spouse handle any disagreements about the sale of the house during the sales process?
5. Is it worth the fight? If your spouse is hellbent on keeping or selling your house do you really want to fight for the opposite outcome? If you are fighting about the house are your arguments logical and rooted in fact?
It’s easy to get attached to houses, especially dream houses. But it isn’t always worthwhile to fight to keep it. That said, I recall a client paying nearly a million dollars more than the house was worth because she loved the highly sought after location. To each his/her own.
As you can see there are many factors to consider when selling your house during divorce. It can be overwhelming but is manageable if you gather relevant information, crunch the numbers, do some soul searching and get good counsel.
If you would like my help deciding whether to sell or keep your house schedule a consulting session.