How to Sell Your Home During a Divorce

Selling Your Home During a Divorce 

Are you going through a divorce? Here is what you need to know about selling your home through a divorce. 

Divorce is one of life's most challenging transitions, and when a shared home is involved, the emotional weight becomes heavier. For many couples with a home in Raleigh and across North Carolina, the family home is not just a large financial asset, but years' worth of memories and shared experiences. 

When a marriage ends, deciding on what to do with that home can feel overwhelming, especially when you are already navigating the legal complexities of divorce. Approximiately 41% of first marriages in the United States end in divorce, and for most couples, the marital home is their most valuable asset. 

If you live in Raleigh and are facing divorce, you are not alone in wondering about your options. The good news is that even if you are going through a divorce, it does not immediately mean that you have to sell your home. Even if you do want to sell, it is essential to seek expert advice. 

At Raleigh Realty, we understand that selling a home during divorce requires not just real estate expertise, but also sensitivity, discretion, and practical solutions during an already difficult time. 

Here is everything you need to know about selling your home during a divorce. 

1. Understanding Divorce and Real Estate Statistics 

Before diving into your options, it's helpful to understand the broader context of divorce and homeownership in America:

Divorce Rates and Homeownership 

• Approximately 2.4 divorces occur per 1,000 people in the United States annually (CDC National Center for Health Statistics)
• Nearly 65% of divorcing couples own their home together at the time of separation
• Real estate division is cited as one of the top three contentious issues in divorce proceedings, alongside child custody and retirement accounts
• The median home equity for married homeowners is approximately $302,000, making it typically the largest asset to divide

Timeline Considerations 

• The average divorce in the United States takes 12-18 months to finalize
• In North Carolina, couples must live separately for one year before a divorce can be finalized, though property division can be settled during this separation period
• Homes sold during divorce proceedings typically take 15-20% longer to sell than traditional sales due to decision-making complexities

2. How to Sell Your Home During a Divorce

A home holds sentimental value, whether you are going through a divorce or not. Sometimes, it's better to rip the band-aid off and move on, and other times it's better to hold on to the home. 

Selling a home during a divorce is one major difference from a typical sale, since you have to figure out who will get what before selling. Whether it's the furniture, the electronics, or the money from the sale, the hardest part will be figuring out who walks away with what.

You will want to consult with an attorney. The attorney is the mediator who will help you divide up possessions and equity fairly. Before you contact a Realtor, you will need an understanding of who will walk away with what after the sale.

A  Realtor can help you determine how much your home is worth. Having a general understanding of the value of your home should give you a ballpark estimate of the equity you will walk away with.

Selling the home and splitting the proceeds is the most common option during a divorce. This option allows couples to divide the equity equally, make a fresh start without shared financial obligations, avoid ongoing disputes, and access cash for separate living arrangements. 

3. Can You Sell a House to a Spouse During a Divorce?

Negotiating on your home is not as complicated as it sounds. Over time, though, the home will likely appreciate or depreciate, and this is where it gets tricky. Depending on which way the home goes, one party will be upset that the other one made more money. Each party bears risk, and you should understand this upfront. 

In most cases, the custodial parent will be the one to continue living in the house, which can be a great way to provide stability for the kids when there is so much change. Oftentimes, the buyout will be included in the separation agreement, in which one party will sell the house to the other. The buyout of the house is completed as part of the divorce settlement.

This can be accomplished by refinancing the house and taking out a new mortgage loan or giving up other assets that are equivalent to the price of the selling spouse's share. If there are other marital investments or retirement accounts, these can be used to settle the interest the selling party has in the home. If neither party wants to sell the house, there are ways in which you can rent the house to your spouse.

4. How to Keep Your House When Separating?

One spouse can keep the house while separating in several ways. A spouse buyout is the likeliest of scenarios. However, there are other ways in which you can keep your house.

One way to keep the house is to 'rent' it from your spouse. Basically, you will pay their portion of the mortgage, and they will be entitled to an interest in the house. However, a divorce is expensive, so you may have to work out a payment plan or sell off other assets.

You can rent it out to another family and continue paying down the home's mortgage. You will want to make sure you are prepared to be a landlord, and any profits or income from the home will likely be split both ways.

Using a property management company that can divide everything equally between spouses may make more sense. Keep in mind that being a landlord is not easy. It's even more difficult when you own a property with a former spouse.

5. Can You Rent a House to a Spouse During Divorce?

This is an unconventional arrangement, but yes, it's legally possible for one spouse to rent the marital home to the other during divorce proceedings. Everything needs to be put in writing because there is a lot of uncertainty as to who pays what and whether you split the costs for expenses. 

How It Could Work

• One spouse moves out and becomes the landlord 
• The other spouse remains in the home as a "tenant" and pays rent
• A formal lease agreement is drafted
• This continues until the divorce is finalized and the property is sold or transferred

Potential Benefits 

• Allows one spouse (often the primary caregiver) to remain in the home with children
• Provides rental income to the spouse who moved out
• Maintains the property while divorce proceedings continue
• Can be a temporary solution while waiting for North Carolina's one-year separation requirement

6. Should I Sell My Home Before or After a Divorce?

This is one of the most consequential decisions you will make, and the answer depends on your specific circumstances. There are many advantages and disadvantages to this: 

Advantages 

• Clean Financial Break: Both parties receive their share of proceeds and can move forward independently without shared debt.
• Simplified Divorce Settlement: One major asset is already divided, making the overall settlement less complicated.
• Tax Benefits: You can potentially take advantage of the $500,000 capital gains exclusion for married couples filing jointly (vs. $250,000 for individuals).
• Shared Decision-Making: Both spouses must agree on listing price, offers, and contingencies, which can prevent one person from sabotaging the sale.
• Faster Resolution: You can sell during the one-year separation period in North Carolina, so the home is already sold by the time the divorce is finalized.
• Avoid Price Manipulation: Some spouses might try to undervalue the home during divorce to reduce the other's share; selling to an objective market prevents this.

Disadvantages 

• Requires Cooperation: Both spouses must agree on agent selection, pricing, showing schedule, and accepting offers.
• Emotional Difficulty: Selling while still legally married can be emotionally painful and may complicate the grieving process.
• Showing Challenges: Coordinating showings when you're both still emotionally raw can be stressful.
• Market Timing: You might be forced to sell during a buyer's market or unfavorable conditions.

7. Tax Implications When Selling Your Home During a Divorce 

Understanding the tax consequences of selling your home during divorce can save you thousands of dollars. First things first, familiarize yourself with how capital gains taxes work. 

Capital gains tax is a tax on the profits from property sales when the gains exceed a certain amount. The IRS allows homeowners to exclude up to $250,000 (individual) or $500,000 (married filing jointly) in capital gains from the sale of a primary residence if you owned the home for at least two of the last five years or if you used it as your primary residence for at least two of the last five years. 

If you sell before your divorce is finalized and file a joint tax return for that year, you can claim the full $500,000 exclusion together. If you sell after a divorce, each individual can only exclude $250,000. If your home has appreciated significantly, this difference could mean substantial additional taxes.

Even if you moved out during separation, you could still claim the use test if your spouse continues living in the home as their primary residence, you remain co-owners, or if the separation is under a divorce decree or separation agreement. 

8. Who Pays the Mortgage During Divorce?

This is one of the most common and contentious questions in divorce, and the answer has both legal and practical components. 

Before the divorce is final, if both spouses are listed on the mortgage, both remain legally responsible for the full mortgage payment. The mortgage lender has a contract with both borrowers and can pursue either or both for the full payment regardless of any divorce proceedings. 

Keep in mind that any missed or late payments will damage both spouses' credit scores equally, even if one spouse has moved out or believes they're not responsible. This remains true until the home is sold and the mortgage is paid off or the mortgage is refinanced in one spouse's name only. 

While the legal obligation is clear, divorcing couples typically handle mortgage payments in one of these ways:

Option 1: Status Quo

• The spouse with primary income continues making the payment as before
• Both names remain on the mortgage until sale or refinance
• This is often memorialized in a temporary separation agreement
• The paying spouse may receive credit for these payments in the final property division

Option 2: Shared Payment

• Both spouses contribute to the mortgage in proportion to their incomes
• Requires ongoing coordination and trust
• Often difficult to maintain as emotions run high

Option 3: Spouse in Residence Pays

• The spouse still living in the home makes the full payment
• This makes practical sense, but requires that the spouse has sufficient income
• Should be documented in writing

Option 4: Court-Ordered Payment

• In North Carolina, the court can issue a temporary order specifying who pays the mortgage during separation
• This is often part of a post-separation support or alimony order
• Violation of court orders has serious consequences

9. Selling As-Is to a Builder 

For many divorcing couples in Raleigh, the traditional home sale process feels overwhelming when you are already dealing with the emotional weight of divorce. Selling as-is to a builder is a popular alternative in this instance. 

An as-is sale means selling your home in its current condition without making any repairs, improvements, or updates. The buyer accepts the property exactly as it is, including any defects, needed repairs, or cosmetic issues.

This works well for divorcing couples since it eliminates repair disputes, there is no preparation required, you can generally sell your home faster, and there are fewer decisions to make. In this instance, you would contact an experienced realtor and get offers from several reputable builders. 

Methodology 

Data was sourced from the CDC, Bankrate, the North Carolina Judicial Branch, and the IRS to determine how to sell your home during a divorce. 

FAQs 

Is divorce considered a financial hardship? 

Divorce can create additional money problems and is considered one of the leading financial hardships. 

Who loses more financially in a divorce? 

Women tend to suffer more financially than men do during a divorce and can expect a decline in their standard of living following a divorce. 

How To Sell Your Home During a Divorce - Final Thoughts 

Selling your home during a divorce can be hard. For Raleigh homeowners navigating this difficult transition, understanding your options is the first step toward making decisions that protect both your financial interests and emotional well-being.

Whether you choose a traditional sale, an as-is sale to a builder, a buyout arrangement, or another path entirely, we are here to help you navigate this transition with professionalism and compassion.

If you are ready to discuss your options, contact Raleigh Realty today for a confidential consultation about selling your home during a divorce.