Although a divorce can tear a family apart and lead to complex and expensive litigation, sometimes it is unavoidable. If you and your spouse have decided divorce is in your best interests, you may be dealing with complicated matters such as asset division and who will continue to live on a shared property. It is a common desire to want to sell or keep one’s house during a divorce. Fortunately, this is one area of family law that has relatively straightforward answers, with help from a family attorney in Sacramento.
Understanding California’s Community Property Law
California is a community property state, which means that all assets and debts accumulated between a couple – including the family home and any other properties the couple jointly owns – will be divided in half, with 50 percent going to each spouse, in a divorce trial in Sacramento. This is how the courts divide all marital property, regardless of whether this is fair or equitable. However, before a property division matter goes to court, the couple has the right to create their own settlement agreement to determine the fate of a shared home.
A Note on Living Situations
Whether you live in the house in question does not, from a legal standpoint, affect whether you can keep/sell the house. A spouse with a community property interest in a home (i.e. if the couple paid for or mortgaged the home after marriage with joint money) does not lose this interest if he or she moves out during separation. However, moving out can create practical issues such as who will continue to pay the mortgage, property taxes, and insurance. You can avoid these complex issues by agreeing on terms of your move with your spouse beforehand.
Selling a House During Divorce
The easiest way to sell your home during divorce is with a stipulation that becomes a court order. A stipulation is a written and signed agreement between you and your spouse that decides important details about the selling of the house, such as:
- Selection of the real estate professional
- How to set the price of the home
- How to reduce the price, if necessary
- Who will be in communication with the real estate professional
- Whether both spouses will need to formally approve offers and acceptances
- Which spouse will ensure the home is ready for presentation
- Whose share of the sold home will pay any liens or encumbrances
Work with an attorney or mediation lawyer in Sacramento for help coming up with a stipulation. A stipulation is the best way to sell your home during a divorce, as it satisfies both parties and does not lead to further litigation. However, not every couple will be able to agree on a stipulation for selling the home.
If a stipulation is not possible in your situation, your next option is to ask the court for an order to sell the house. You can do this prior to your divorce trial instead of waiting until the end of the divorce if you have a good reason. Reasons the courts will typically accept include the threat of foreclosure or to use the proceeds to pay for attorney’s fees and costs.
When Can I Sell My Home During a Divorce?
Laws are in place in California to prevent an individual from selling a home out from under his or her spouse in the midst of a divorce, even if the house is solely in that spouse’s name. Both parties must wait until an agreement or court order has been obtained to sell properties and make other major financial decisions. This rule prevents an individual from selling or transferring a marital home without permission.
Upon the filing of a divorce petition in California, documents known as Automatic Temporary Restraining Orders (ATROs) immediately go into effect. These prevent either spouse from making significant financial changes without consent from the other party or a court order while a divorce case is pending. This includes selling a home. To sell a house, all ATROs must be lifted and a mutual agreement or court order must be confirmed.
Agreement vs. Court Involvement for House Sales During a Divorce
The simplest and most straightforward way to sell a home in a divorce case is through mutual agreement with your spouse. Through out-of-court processes such as mediation and arbitration, you and your spouse may be able to come to a compromise regarding the terms of your dissolution, including what to do with the marital home or other jointly owned properties. In this case, you can work together to agree on a sale price, list the property and equitably divide the proceeds of a sale.
If you and your spouse cannot agree on the sale of the house, the legal dispute may end up in court. If necessary, the court can issue an order that allows for the sale of the property. If neither party can afford to continue making mortgage payments after the divorce, for example, a judge may order the home to be sold and the proceeds divided. The court will also decide how money made from the sale of the home will be distributed between the parties based on factors such as each spouse’s contribution to the property and financial status.
Tax Implications of Selling a House During a Divorce
It is important to consult with a tax professional regarding the potential consequences and considerations involved in the taxation of a property sale in a Sacramento divorce case. A certified tax professional can provide a comprehensive overview of potential tax liabilities so that you understand your position fully before making any decisions.
In general, married couples enjoy a tax break through the capital gains tax exemption. This rule allows a married couple to exclude up to $500,000 of the equity of the home from capital gains taxes when the property is sold. Both spouses may be able to avoid paying taxes on equity if the house is sold during the divorce. Selling the house after the divorce is finalized, on the other hand, could lead to having to pay an expensive capital gains tax.
How to Keep the House During Divorce
If you have your heart set on keeping your home during a divorce, you will most likely go through the buyout process. This will be the case most often in California instead of the courts giving a home to one spouse over the other, as California divides all marital properties 50/50 in a divorce – including a home. A buyout is like the sale of a house except that one spouse is selling the house to the other spouse. An appraiser will give you the fair market value of the home and you will work together with your spouse to come up with a buyout amount.
Your buyout payment method will depend on your case. In a stipulation to buyout the home, you and your spouse will need to agree on how the buyout will occur, when you will pay the buyout amount, whether to remove the other spouse’s name from the title, mortgage loan issues, and other factors. Working with a Sacramento divorce attorney increases your chances of a positive outcomes if you want to sell or keep your house during a divorce in California.
