My husband and I are filing for divorce and are wondering if it would be better to sell the home before or after the divorce. Are there pros/cons to either to keep in mind?
Livia, I'd suggest that you try to sell the house before the divorce, in order to have the transaction completed and property separated after the divorce is finalized. This is to assume that you can get a fair price for the home in that time span. If not, depending on the situation, you might want to sell for less than value or swap other assets with your soon to be ex-spouse in order to square up.
I've seen situations like this drag out for many years, with one spouse living in the home having little or no incentive for selling the place, in fact making it so that potential buyers are put off.
From a tax perspective there is not much difference between selling before or after the divorce, but selling before the divorce would imply a completion of the transaction sooner, which could be beneficial from a tax standpoint. If one of you has moved out of the house and subsequently has not lived there for several years by the time it's sold, there could be capital gains tax owed on any gain in value, for example.
Anyhow, I think in the long run you'll both be better off by selling as soon as possible, even delaying finalizing your divorce until the sale if necessary.
As a divorce financial planning practitioner, I've found this to be the most contentious issue fraught with all sorts of emotional baggage. Many times couples fight over who gets to keep the house and it can become the winner's curse. What is often overlooked is the fact that there may not be enough income to support the full cost of ownership by one earner. And it may not be possible for the other party leaving the house to be able to pay support and try to maintain a new household as well.
So I'm glad to see you asking this question ahead of time.
Generally, you may be better off to sell the property while still married simply because you will be eligible for the $500,000 exclusion on capital gains. Once you are divorced the capital gain exclusion drops to $250,000 for each person individually. In these times with real estate prices as they are that may not be an issue but it is a valid consideration.
Many times divorce decrees indicate that one party may live in the property for a while and either sell or refinance within five years. That's nice up to a point especially if you need time for kids to graduate school or need time to qualify for a good interest rate.
But as long as you own the house together (at least as noted on the deed) and have your names jointly listed on the mortgage, one of you will be hard-pressed to move on and establish a new life and new household especially since any lender will count the other mortgage obligation. (Sure, some lenders may waive it but typically require all sorts of documentation "proving" that only the occupant has been paying the loan. But you don't want to have to count on that happening).