Selling a house during a divorce in Philadelphia, Pennsylvania, adds to the often stressful and frustrating experience of even the most amicable divorces. When a couple owns real estate together, whether it’s a marital home, a business property, or another type of jointly-owned real estate, selling as part of a divorce can be one of the most challenging aspects, second only to concerns about children and finances.
If you are going through a split, the following tips can help you understand what to expect when selling a house during a divorce in Philadelphia, Pennsylvania.
When Both Parties Want to Sell the Property
Ideally, both parties have built up equity and mutually agree to sell the property quickly and easily. In this case, the process is relatively straightforward. If neither spouse wants to stay in the home or can afford to buy out the other, you can list the property on the market and aim for the best price, depending on the local market and the property’s condition.
Before dividing the sale proceeds, you’ll need to pay off the mortgage, any equity lines or second mortgages, and real estate commission fees. Capital gains tax might also apply if you haven’t owned the property for a long period. Although these expenses can be a downside, selling the property allows both spouses to get money to start fresh, aiding a clean break.
The Selling Process
Once you decide to sell, you’ll face a detailed process involving several house projects. This can be challenging during a divorce, but it’s necessary.
- Agree on a Listing Price: Both parties need to agree on a listing price for the property, considering current market conditions.
- Showing Schedule and Costs: Agree on a schedule for showing the home and determine who will cover the costs associated with the sale.
- Proceeds Distribution: Decide whether the proceeds will be distributed immediately or placed in an escrow account to avoid future disputes, such as capital gains taxes.
Legal Considerations
Since Pennsylvania is a Trust Deed State, attorneys or lenders may handle closings, and corporate agents issue title insurance. Conveyance is by warranty deed, and deeds of trust with a private power of sale are customary. Foreclosures are non-judicial with a 10-day redemption period, and the entire process typically takes 45 to 60 days. Closing costs are negotiated, with buyers paying recording costs and sellers covering document preparation and transfer tax costs. Property taxes are due annually on the last day of the year.
Selling at a Loss
In some cases, selling the property at a loss may be the only option, especially if the divorce is contested or one party wants to stay temporarily. If selling isn’t feasible, another option is to keep the home as a rental property and act as co-landlords, although this requires continued interaction.
When One Party Wants to Stay
If one party wants to remain in the home, refinancing the mortgage in the name of the person staying can be an option. The home will be appraised, and an “equalization payment” will be made to the other party, representing half the equity.
For instance, if the home was bought for $80,000 and $20,000 remains on the mortgage, both parties would be entitled to $30,000 in equity. The party staying in the home could secure a $50,000 cash-out refinancing. If they can’t qualify alone, refinancing can be done in both names, with the loan restructured after the divorce, provided they can document 12 months of mortgage payments from the staying spouse’s account.
When Parties Can’t Agree
The worst-case scenario is when parties can’t agree on selling the home. In such cases, the court may intervene, often leading to dissatisfaction and high legal fees that can consume any profits from the sale.