Getting Divorced? Here's Why It May Be Smart To Sell The Family Home First
Divorce is a tremendously difficult thing for most people to handle -- so the last thing you may want to contemplate in the midst of a divorce is adding the stress of selling the family home into the equation. However, there are some very good reasons that selling the family home before you finalize the divorce might be the smartest move you and your spouse can make.
1. It's far easier to divide money than it is to divide a house.
For many couples, the single biggest joint asset they hold is their home. Unfortunately, it generally isn't practical for both halves of a divorcing couple to continue living in the same house, even if they're fairly civil to each other. The easiest way to divide the house is to sell it -- which converts the equity in the home to cash that can be quickly split.
While there are other options, they generally aren't as practical. For example, one spouse can always buy out the other's share of the house -- but only if one spouse happens to have enough money lying around to do it. That's seldom the case.
2. The capital gains taxes might be an issue.
Capital gains taxes -- taxes that are imposed on the profits from the sale of a home when those profits exceed a certain value -- may also be a factor in your divorce. This is particularly true if you have a vacation home that has to be sold or you've only lived in your primary residence for a short period of time and property rates in your area have escalated quickly during that time.
Selling while you're still married lets you and your spouse each exercise a $250,000 exemption on the tax, for a total exemption of $500,000. If your home is quite valuable or you're obligated to sell a vacation property that would automatically be subject to capital gains taxes, selling before you divorce will save both you and your spouse money.
3. You can take advantage of the current real estate market.
You know what the real estate market in your area is like right now. Any guess about what the future real estate market will look like is purely speculative. Unless you can't afford to sell the home right now because the real estate market is so weak, you're generally better off selling right away. That allows both you and your spouse to make reasonable plans for the future based on what you expect to get from the sale of the home.
While every situation is different, it's important to consider all the financial angles when you're getting a divorce. Your divorce attorney can help you make sound decisions each step of the way.