How To Sell A House When Going Through A Divorce In Texas
Divorce is a constant cycle of decisions: who gets the car, who’s at fault, who gets the dog? Add family dynamics and emotional turmoil to the mix, and it’s easy for important details to fall through the cracks.
It’s best not to lose sight of an important asset amid all the chaos of a divorce: your home. For most couples, the marital home is the largest asset they have, and during a split, you’ll want to ensure you get your fair share. Don’t go into negotiations without some background knowledge of real estate and divorce. Know your options and stay ahead of the situation. Read this article to equip yourself before coming to the negotiation table.
Is Your House Community Property Or Separate Property?
Texas is one of nine states that recognizes two categories of real property: community property and separate property.
Real property pertains to land and any structure which is permanently attached to it.
- Community property: This refers to assets or possessions acquired during the marriage, or assets that were commingled in the marriage. Community property can include a wide range of possessions such as real estate, bank accounts, or anything acquired during the marriage.
- Separate Property: This refers to assets or possessions that were owned by one spouse before the marriage or property that was inherited or gifted solely to one spouse. Separate property can also include real property, provided it was not commingled with community property or used for joint purposes.
If it’s your marital home, it’s most likely considered community property, even if your name is not on the deed. If the property was acquired before marriage but was used as the primary residence during the marriage, then it’s still arguably community property, especially if you’ve made substantial contributions to its upkeep, such as paying the mortgage or even simply maintaining the property.
On the other hand, if you’re talking about an entirely different property, the classification would depend on several factors.
- How was the property acquired?
- Which funds were used to purchase the property?
- Was the property inherited by one spouse?
- Was the property a gift?
- Did you provide financial or personal care to the property?
- Was the property used by the family?
Gifts your spouse has given to you are also considered separate property. So, if you’ve been gifted real property by your spouse, it is legally yours.
Of course, these are just some questions to consider. You are still advised to seek legal counsel to verify your claim.
Exemptions: Prenuptial and Postnuptial Agreements
After considering the questions above and having a strong inkling that the property is community property, it’s important to know that the situation is still not straightforward.
Even if the property would generally be considered community property, you should first review any contracts, such as a prenuptial or postnuptial agreement, that you’ve signed before or during the marriage.
- Prenuptial Agreement: A contract which both parties enter into before the marriage. This agreement outlines the conditions, responsibilities, and rights that each party is expected to have.
- Postnuptial Agreement: A contract that both parties enter into during the marriage, outlining their rights in the event of a divorce. This is similar to a prenuptial agreement but is created after the marriage has already taken place.
Regarding real estate, a prenuptial or postnuptial agreement could protect or relinquish ownership of any property that both parties acknowledge should the marriage end.
However, a prenuptial agreement may offer better protection for your assets compared to a postnuptial agreement. Since a legal contract has been signed before the marriage, each party’s assets are clearly separate property. On the other hand, once they are married, properties could arguably become community property.
For example, if your prenuptial agreement states that the property is yours to keep in the event of a divorce, then it’s clearly your right to sell. Some agreements may also include a timeline for a clause to become valid. It could also have clauses that prevent the sale of the marital property if the children are not of legal age yet. These are important factors to consider before deciding to sell property during divorce, as prenuptial or postnuptial agreements are legally binding and carry legal consequences.
Double-check any agreements made before or after the marriage to determine whether the property is separate or community property. If no agreements have been made, or if real property is not addressed in the agreement, then Texas’ community and separate property laws will apply.
How is Property Split during a Divorce in Texas?
Community property and its monetary value, if sold, is split according to the agreement between the parties involved. Remember, it’s still both of your property and what you do with it depends on your divorce agreement.
During negotiations, you have control over what will happen to the property. If you have multiple properties, you can simply each have one or agree to sell both and split the proceeds equally, or however you see fit. It’s all about being on the same page, and though this can be difficult during a divorce, it is necessary.
Essentially, you have three possible options:
- Sell the house and split the profits.
- One spouse receives sole ownership of the property.
- Both spouses retain ownership of the property for a specified period and then sell it once that period is reached. This option is more common if children are involved.
If the spouses don’t come to an agreement on what to do with the property or how the proceeds should be divided, then the court will intervene. It’s best to avoid reaching this point, as decisions regarding the property will be out of your hands and at the mercy of the court.
Texas divorce law does not divide property equally, per se, but equitably.
In some cases, this can be good because the court will divide the property in a way that is fair based on each spouse’s individual circumstances.
Equitable doesn’t necessarily mean equal, as in 50/50, but it depends on what is fair for each individual. That could be anywhere from 20/80 to 40/60, and maybe even 50/50–whatever the judge deems as fair.
The judge will determine what is equitable in different ways. For example, if one spouse gains custody of the kids, the court may consider that spouse to have a greater need than the other. Similarly, if one spouse is a homemaker and the divorce puts them at an economic disadvantage to the higher-earning spouse, that may also influence the court’s decision.
Many complex factors determine what’s equitable, so having a skilled attorney is crucial if the case goes to court.
Real Estate Tax Implications during a Divorce in Texas
Now that you know your property is community property and your prenuptial or postnuptial agreements allow for the sale of the house–don’t sell the house just yet!
There are important tax implications that every homeowner should know about. While Texas does not impose a state-level capital gains tax, homeowners still need to worry about the federal capital gains tax. Fortunately, married couples enjoy a significant tax benefit when selling property, especially if it’s your primary residence.
Capital gains tax is the tax imposed on homeowners on the percentage of the profit they gain from selling property that has appreciated in value.
Capital gains = Selling Price – Cost Basis
Let’s say you bought your house for $500,000, and five years later it appreciated in value to $800,000.
$300,000 = $800,000 – $500,000
Your taxable profit will be between 15%-37% of the $300,000, depending on your income level.
You may be able to avoid paying capital gains tax if the property is your primary residence. Married couples who file jointly qualify for up to $500,000 exclusion, while single filers are eligible for up to $250,000.
There are only three requirements to qualify for the tax exclusion:
- The property must be your primary residence.
- You would have lived there for at least 2 years out of the 5 years of ownership. These 2 years do not need to be consecutive.
- You have not claimed another real estate tax exclusion within the past two years.
Should I Sell Before or After the Divorce?
The answer to this question largely depends on your relationship with your ex-spouse. If it’s an amicable decision, then selling before filing for divorce could be beneficial, as it would be a simpler process and proceed like any traditional sale, where the profit will be equally yours.
However, if the split is more contentious, having legal representation may be a better option. In this case selling before the divorce is finalized can offer advantages. With an attorney involved, your interest will be protected and the process may proceed more smoothly.
Pros of selling before finalizing divorce
- A 500,000 capital gains tax exclusion (for married couples filing jointly).
- Emotional relief from any assets tied to your spouse.
- Both spouses will continue to share responsibilities for the maintenance, mortgage, and utilities of the property.
- Both spouses’ rights are protected by an attorney.
How to Sell a House While Going Through Divorce
Selling a house during divorce can be a challenging process, and its success often depends on how well the couple can cooperate. If both parties are in agreement, the process may go smoothly. However, an added complexity in a divorce sale is the involvement of attorneys who are fighting for the interest of the opposing side. Here are some tips for navigating the sale of a property while going through divorce.
Get on the same page with your spouse.
If you want to sell your house on your terms and not involve the court, then you and your spouse quickly come to an agreement about what to do with the property. Try to compromise with each other for a smooth, successful sale.
The main things to go over are:
- What price should the house be sold for?
- How will you split the profit?
- Who will pay for any additional expenses, such as repairs or renovations?
- When do you want the sale to take place?
- Who will stay in the house during the sale process?
- Will you sell the house to a real estate agent? If so, who?
Get a Neutral Third Party you can both trust.
Even if you and your spouse aren’t on good terms, it’s still possible to sell your house by hiring the right professional to guide you through it.
If you’re selling through a real estate agent, choose one who is an unbiased, neutral third party that both of you are comfortable working with. This ensures that neither spouse gains an unfair advantage.
Hiring the right attorney is also critical if you plan to have them handle the sale. They will serve as the main point of contact, communicating with the attorney of your soon-to-be ex-spouse regarding any decisions and negotiations regarding the sale of the house.
Don’t Market the House as a Divorce Sale
If potential buyers know that the property is being sold due to a divorce, they may try to lowball you. This is because divorce sales are often rushed for various reasons: spouses may want to quilt sever ties, need the financial proceeds, or want to sell before the divorce is finalized to take advantage of the capital gains exclusion.
To avoid rush sales, set a realistic time frame that works for both of you. Consider possible repairs, home preparation, house showings, and negotiations. Keep in mind that most home sales take several months to complete, at best.
Fastest Way to Sell a House During Divorce: Sell to Real Estate Investors
During a divorce, sometimes the best option is to cut ties as quickly as possible. One way to do this is by selling to a real estate investor or cash buyer.
Real estate investors buy houses in any condition and can close a sale in as little as a week. With them, you won’t have to wait months to receive your fair share of the property. They routinely purchase homes to flip, so with them, it’s always a good time to sell.
Divorce often signals a desire for a fresh start, and a new home may just be the change you need. Selling to a real estate investor is a reliable and efficient way to make a successful sale.
Of course, since selling to real estate investors saves you a lot of money, it is common to receive a lower offer than the market price. However, it could also save you money in other ways, such as if you’re in a rush to file jointly for a capital gains tax exclusion. Another advantage of selling to real estate investors is that you’ll avoid the 6% commission fee of hiring a real estate agent. Plus, you won’t incur additional attorney fees, which are usually charged by the house, since they won’t need to handle the sale.
If you’re interested, look no further: we’re the Southern Hills Home Buyers. If you’re looking for a speedy yet reliable sale, you’re in the right place!
With years of experience in the industry and hundreds of successful homesales, we’ve helped countless satisfied sellers. We understand that you want a fresh start, and unlike your previous relationship, there’s no need to commit with us.
Simply fill out the form below for a quick, no-obligation cash offer delivered straight to your inbox and if you like it, we’re in business.
FAQs:
Do both spouses have to agree to sell the house?
Yes, if both names are on the title, both parties must agree to sell the home. If there is a dispute, the court may step in and make a ruling.
What happens if one spouse refuses to sell?
If one spouse refuses to sell, the other can request a court order to force the sale. The court will determine how the proceeds are divided based on Texas community property laws.
How is the home’s value determined?
The value of the home is typically determined by a professional appraisal or a comparative market analysis (CMA) from a real estate agent.
How are the proceeds from the sale divided?
Texas is a community property state, meaning that, in most cases, the proceeds from the sale are split equally unless a court decides otherwise based on other factors.
Can we sell the house before the divorce is finalized?
Yes, but both spouses must agree on the terms. If the court is involved, approval may be required before the sale is finalized.
What if there is still a mortgage on the house?
The mortgage must be paid off when the house is sold. Any remaining equity is typically split between both spouses based on the divorce settlement.
Who is responsible for repairs and upkeep before the sale?
This depends on what both spouses agree upon or what the court orders. In many cases, expenses are split or deducted from the sale proceeds.
Can one spouse buy out the other’s share?
Yes, one spouse can refinance the home in their name and pay the other spouse their fair share of the equity.
What if the house is underwater (worth less than the mortgage)?
If the house is worth less than the remaining mortgage, both spouses may need to agree on a short sale or negotiate with the lender.
Do we need a real estate agent?
While not required, a real estate agent with experience in divorce sales can help navigate the process and ensure both parties get a fair deal.
How does selling the house affect taxes?
There may be capital gains tax implications, especially if the home has significantly appreciated in value. Consulting a tax professional is recommended.
What legal steps should we take before selling?
It’s best to consult a divorce attorney to ensure the sale aligns with court orders and Texas property laws.
Key Insights:
- Texas is a Community Property State – Assets acquired during the marriage, including the house, are typically considered joint property and must be divided equitably unless a prenuptial agreement states otherwise.
- Legal Considerations – A divorce decree or court order may dictate how the property is handled, including who stays in the home and how proceeds are split.
- Agreeing on Selling Terms – Both spouses must agree on the listing price, real estate agent, and sale terms unless the court intervenes.
- Handling Mortgage & Liabilities – If both names are on the mortgage, the responsibility remains until the house is sold or refinanced, even if one spouse moves out.
- Tax Implications – Capital gains tax exemptions may apply if the house was a primary residence for at least two of the last five years, but consulting a tax professional is advised.
- Working with Professionals – Hiring a neutral real estate agent, mediator, or attorney can help navigate disputes and ensure a smooth sale process.
- Timing & Market Conditions – Selling quickly may be necessary to finalize the divorce, but waiting for a strong market could maximize profits.
- Alternative Options – Instead of selling, one spouse may buy out the other, or they may agree to co-own the property temporarily, especially if children are involved.
We buy houses across Texas, including areas in and around Dallas, Austin, Red Oak, San Antonio, Irving, and Houston. If you need further assistance, please call Southern Hills Home Buyers or visit our website to learn more about our company.