What to Do With Your House After Divorce
For divorcing couples, what to do with the house is an important consideration. This article reviews your options.
Divorce is an unpleasant topic. But, unfortunately, divorce happens. It’s important to think through the financial and practical challenges arising from a divorce, especially if children and other family members are affected.
One of the key considerations for divorcing couples is what to do with the house that they own and share. After all, it’s most likely the most valuable asset you own. If you’re divorcing, these considerations might result in quickly and simply selling the house, or in one spouse keeping the house and remaining there. Here are the pros and cons of five options for what to do with your house after a divorce.
Option 1. Keep the house
Pros: Letting one spouse keep the house simplifies post-divorce living arrangements — one spouse has a place to live and the other can search for a new place. This can be really beneficial if you have kids and want to make sure their lives are disrupted as little as possible. In addition, this enables one spouse to continue building equity in the home by refinancing the mortgage in their own name. With only one spouse owning the house once a divorce is finalized, there’s a clean slate financially and emotionally for both of you.
Cons: Figuring out which spouse gets to keep the house can trigger an argument in what’s likely to be an already tense situation. Also, it’ll certainly be more burdensome for one spouse to cover the mortgage on their own. On top of that, hanging onto the house doesn’t provide money you’d gain from a sale. Finally, the ex-spouse who doesn’t keep the house will have to go through the process of finding and paying for a new place to live.
2. Rent out the house
Pros: Turning your house into a rental property creates a stream of revenue for one ex-spouse, or potentially both ex-spouses if each of you retains ownership. This rental revenue might help at least one ex-spouse cover post-divorce household expenses. It also means no one in the family has to continue living in a house with emotional baggage.
Cons: On the other hand, owning and operating a rental property is a full-time job of its own, and it might leave you with not one but two monthly mortgage payments. Being a landlord can be lucrative, but dealing with tenants is a burden. If both of you wind up owning the house after the divorce, there’s the matter of deciding which party wears the landlord hat, or whether you divide those duties. Keep in mind that experts recommend against joint ownership of a home following a divorce. Joint ownership prevents you from cutting financial and emotional ties.
Also consider: What to Do if You’re Tired of Being a Landlord
3. Sell the house through a real estate agent
Pros: A good real estate agent knows your neighborhood and knows how to market and sell your home. Hiring a real estate agent takes most of the homework and guesswork out of selling your home at a time when you’ve already got so many other things on your mind.
Cons: There are many. One of the biggest drawbacks of listing your house with a real estate agent is that they’ll take a commission when it’s sold. Typically, a seller pays a total of 5% to 6% in commission to their own agent and the buyer’s agent. Selling with a Realtor also takes time. You may need to renovate or remodel to get the house market ready, and you or your ex will be paying holding costs in the meantime. Then there are the hidden costs of cleanings, staging, and closing costs when you finally sell. Finally, what if the value of the home is below the amount you owe? In that case, selling the home could be a money loser for both ex-spouses. One of the goals in a divorce is to ease financial pains, not increase them.
4. Do a for sale by owner (FSBO) deal
Pros: Taking on the task of selling your home — advertising, open houses, dealing with buyers — can save you a lot of money. How? You’ll be able to keep all the proceeds from the sale, rather than splitting them with a real estate agent. An FSBO deal also may put more control in your hands, which is no small benefit at a contentious and stressful time.
Cons: Handling all of the particulars involved with marketing and selling your home can be overwhelming. That’s a big issue when you’re going through an emotionally draining divorce. FSBO sales also typically take much longer than traditional sales, which could drag out the process. Plus, you can’t lean on the knowledge of a real estate agent.
5. Sell to an off-market buyer
Pros: Selling your house to an off-market buyer cuts out the middleman and speeds up the process, particularly since you’re dealing one-on-one with a cash buyer. It allows you to keep more of the net proceeds, since you won’t be paying commissions to a real estate agent. Selling your home on Sundae’s marketplace means you can pick an offer from a variety of investors who bid on your property. You can also close in as little as 10 days, pay no closing costs, and may be eligible to receive a cash advance to help you with moving or other expenses. Such an expedited process means no repairs or updates to the house are necessary, saving you time, money, and stress.
Cons: One of the downsides of selling to an off-market buyer is that, depending on the buyer, you may be handling many of the details that a real estate agent typically would. Though you will keep more money from the sale in your pocket, most off-market purchases go for a lower price than a traditional real estate market transaction. You’ll need to do a net proceeds calculation to figure out if it makes sense for you and your ex-spouse.