How to Sell a House During a Divorce

Can you sell a house while a divorce is pending?

Yes, you can usually sell a house before a divorce is final, as long as both spouses agree in writing or a judge approves it. Many couples sell first so there is cash to split instead of a house to fight over.

The catch is that a pending divorce can put limits on what either of you can do alone. You also need a clear written plan for who pays the bills until closing and how the money gets divided. A family law attorney can turn that plan into a signed agreement or court order.

Do both spouses have to sign to sell?

In most cases, yes. If both names are on the deed, both spouses must sign the listing agreement, the purchase contract, and the deed at closing.

Even when only one spouse is on title, the other may still have to sign. In Texas, for example, Family Code Section 5.001 says neither spouse may sell the homestead without the other spouse joining in, whether the home is community or separate property. Other states have their own marital property and homestead rules.

Your state also matters for who owns what. The IRS lists nine community property states in Publication 555: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In those states, a home bought during the marriage is generally treated as owned by both spouses. Rules vary by state, so see our state guides and ask an attorney.

Can a court order stop you from selling?

Yes. In some states, filing for divorce automatically puts orders in place that stop either spouse from selling, transferring, or borrowing against property.

California is a clear example. Under Family Code Section 2040, the divorce summons contains automatic temporary restraining orders. They bar either spouse from transferring, encumbering, or disposing of property without the other spouse's written consent or a court order, with limited exceptions such as the usual course of business or necessities of life.

If one spouse refuses to cooperate, the other can ask the judge for an order allowing the sale. A judge may also decide what happens to the house as part of dividing property. That route is slower and more expensive than agreeing.

Should one spouse buy out the other, or should you sell?

Sell if neither of you can afford the house alone or you both want a clean break. Consider a buyout if one spouse wants to stay and can qualify for a new loan on one income.

For a refinance buyout, lenders have specific rules. Fannie Mae's Selling Guide lets a co-owner buyout count as a limited cash-out refinance when all parties sign a written agreement on the property transfer and how the loan proceeds are paid out. It also requires 12 months of joint ownership in most cases, and the spouse keeping the house can't take any of the cash. Ask a loan officer how this applies to you.

Does the divorce decree take your name off the mortgage?

No. A divorce decree can say who must pay, but the lender is not a party to your divorce. If both names are on the loan, both of you can stay legally responsible until the loan is paid off, refinanced, or assumed with the other borrower released.

The Consumer Financial Protection Bureau has reported that homeowners often run into trouble with servicers after a divorce, including when the spouse keeping the home tries to assume the loan so the other borrower can be released. A late payment by one spouse can hurt both credit reports.

This is one of the strongest reasons couples choose to sell. The sale pays off the mortgage at closing, and both of you are free of it.

How are the sale proceeds split?

Proceeds are split the way your settlement agreement or court order says. There is no automatic 50/50 rule everywhere.

Here is the order money flows at closing:

1. The sale price comes in from the buyer.
2. The mortgage payoff, any home equity loan, and any liens are paid first.
3. Closing costs come out, plus agent commissions if you listed.
4. What is left is the net proceeds.
5. The net is paid out per your agreement, or held in escrow or an attorney trust account until the court decides.

Example: A house sells for $300,000. The mortgage payoff is $180,000 and closing costs are $10,000. That leaves $110,000 in net proceeds. If the settlement says 50/50, each spouse gets $55,000. If one spouse paid the mortgage alone for a year, the agreement might adjust for that. Your attorneys work out those credits.

Tell the title or escrow company early that the sellers are divorcing. They need written instructions from both of you, and sometimes the court, before they release any money.

What are the tax rules when you sell during a divorce?

Moving the house from one spouse to the other as part of the divorce is generally not a taxable event. A sale to an outside buyer can be.

Key federal rules from the IRS:

• Transfers between spouses: Under Publication 504, no gain or loss is recognized when property passes to a spouse or former spouse incident to a divorce. The receiving spouse takes over the original tax basis.
• The home sale exclusion: Publication 523 lets you exclude up to $250,000 of gain from the sale of your main home, or $500,000 for a married couple filing jointly, if you meet the ownership and use tests (generally 2 of the last 5 years).
• Moved out already: Publication 523 also says you can count time your spouse or former spouse lived in the home as your use, if a divorce or separation instrument lets them live there as their main home.

Timing can change your filing status and which exclusion applies. Talk to a tax pro before you set the closing date. We don't give tax advice.

How do you sell fast if you both just want it done?

If you both agree and want speed, a cash sale to a local investor can close in a few weeks, with no repairs, no showings, and no waiting on a buyer's loan. See how fast a cash sale can close.

The trade-off is price. A cash buyer almost always pays less than a fully repaired house would bring on the open market. Many investors work from an industry rule of thumb called the 70% rule: about 70% of the after-repair value, minus repair costs. Run your numbers with the cash offer calculator before you decide.

You can ask Cash Offer Desk for a written cash offer and get offers from other local buyers too. Cash Offer Desk is free for sellers and tells you up front, in writing, if it plans to assign the contract to an investor partner. Both spouses can see the offers side by side, which helps when trust is low. Read how we make money for the details.

Listing with an agent is usually the better choice if the house is in good shape, the market is active, and you can wait a few months. Compare both paths in cash offer vs. listing with an agent.

What steps should you take before you sell?

Take these steps before you sign anything with a buyer or agent:

1. Talk to a family law attorney. Confirm whether any automatic orders apply and what consent or court approval you need.
2. Get a mortgage payoff statement. Ask your servicer for the exact payoff amount and check for a second mortgage or liens.
3. Agree on who pays until closing. Put the mortgage, taxes, insurance, and utilities in writing.
4. Agree on the price floor. Decide together the lowest offer you will accept, so one spouse can't stall or rush the sale.
5. Agree on how proceeds are split or held. Write it into the settlement or a short signed agreement.
6. Compare a listing and cash offers. Look at your net after costs, not just the price.
7. Both sign the contract. Make sure every owner and any spouse whose signature is required signs.

If a buyer pushes hard for one spouse to sign alone, stop. Also ask any cash buyer, "Are you buying this house yourself, or assigning the contract?" Some buyers are wholesalers. Read what real estate wholesaling is so you know what you are agreeing to.