Selling a Home in a Divorce? Avoid These 7 Common Mistakes

Mistake #3: Letting maintenance around the house slide.

This can happen inadvertently after one spouse moves out but can cause hiccups later.

And it’s not just buyers who you have to worry about keeping appearances up for. If the lawn starts to look shabby and overgrown, you could get slapped by your city for a code violation.

Wyatt worked with one couple who had been separated for at least a year. The estranged wife, who was living in the house with the couple’s children, worked a full-time job and was overwhelmed trying to maintain the property.

After the agent outlined repairs that “weren’t extravagant” but would help extract a good selling price, he had to consult with both spouses and even a judge to approve the expenses.

“The divorce decree was pretty specific on what money could be spent and who had to approve it,” he said. “I spent multiple phone calls with the husband and the wife, and then both of them on a conference call, trying to outline how much it was and who was going to do it, and then make sure that it got approved.”

Mistake #4:  Both spouses move out, leaving the house bare for showings.

Empty homes can be harder to sell and don’t always show as well as furnished properties.  Buyers have a difficult time visualizing a space without the context clues of furniture and decor, while bare rooms can actually appear smaller than they are.

Soft staging techniques help add warmth to space where furniture’s lacking or professional staging is always an option — but it’ll cost you when finances are likely already on the rocks.

So when both spouses move out of the house before it sells (whether it’s completely vacant or scattered with a few leftover furnishings) you risk damaging the marketability of the home — plus you’ve now just made it so there’s three housing payments to take care of between the two divorcing spouses.

Real estate pros suggest the best move is often for one of the spouses to stay in the house until it sells, if possible. However, it’s ideal if you can make it look like both of you are still living there so that buyers don’t suspect there’s a divorce happening (we’ll discuss more on that below) and think they can make you a lowball offer.

Mistake #5: Failing to preserve the capital gains tax break.

In simple terms, the capital gains tax is a tax that you pay on the profit you receive from selling a capital investment such as a house. If you sell your house while you’re married, each spouse can exclude the first $250,000 of profit from your taxable income (for a total of $500,000).

If you sell your house at the time you’re getting a divorce, you’re entitled to exclude the same total of $500,000 of gain from tax if both spouses lived there for two of the five years before the sale, according to Oakland, California, attorney Emily Doskow, author of Nolo’s Essential Guide to Divorce.

However, several factors can affect this exclusion, such as when you file for divorce, when your home is sold, whether both spouses co-owned the house even though only one lives there, or whether one spouse buys out the other half of the house.

Consult HomeLight’s guide to the capital gains tax and divorce for more information. Then, review your options with a CPA or real estate attorney to minimize your capital gains tax liability and preserve the exemption in the event of a divorce.

Mistake #6: Allowing emotions to cloud decisions that impact the sale financially.

Divorce is the second most stressful life event people experience, according to the Holmes-Rahe Life Stress Inventory, a tool that mental health professionals use to categorize stressful life events.

So it’s no wonder that selling a home in a divorce is fraught with emotion, especially if one partner doesn’t want to part with the property.

Even so, experts such as Rachel Fishman Green, an attorney and mediator at ReSolution Mediation and Collaborative Services in Brooklyn, N.Y., advise not letting spite, anger, or bitterness take charge of your real estate deal. “I’ve heard horror stories of divorcing couples fighting and stopping a closing at the last minute because of some other disagreement in their relationship,” she said.

Mistake #7: Making the divorce situation obvious to potential buyers.

Although market conditions certainly come into play as far as how fast a house can sell, seasoned listing agents don’t let on that their clients are divorcing. “Anytime I hear ‘divorce,’ I immediately think there’s a discount on the house,” Wyatt said.

If potential buyers ask why the family is selling, he says they’re relocating or downsizing. He’s also careful that the home doesn’t look like one of the spouses has left.

“We don’t want to put our clients at a disadvantage,” he said. “In a couple of divorce situations, especially on some higher-end real estate, we actually have them put male clothing in the master closet, so buyers would not pick up that it was a divorce.”

Selling a house in a divorce: Keep the focus on your next steps and financial future

While divorce can make selling a house more painful, there are professionals on your side, such as a lawyer or mediator, a financial planner, a tax professional, and your real estate agent. Focus on the sale as a vital part of starting a new chapter in your life, not as a symbol of your past, and sidestep rash decisions and impulses that could impact your financial future.

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