Selling a house during a divorce in Arizona

Who owns the house?

Under ARS 25-211, property either spouse acquires during the marriage is community property, except property received by gift or inheritance and property acquired after a divorce petition is served (if the petition leads to a decree). A house owned before the marriage is separate property under ARS 25-213, but if community money paid down the mortgage or paid for improvements, the other spouse may have a claim for part of the value. The deed alone doesn't answer the question.

Why both signatures are required

ARS 25-214 requires both spouses to join in any sale or encumbrance of community real property. On top of that, when a petition for dissolution is filed, the court issues a preliminary injunction under ARS 25-315 that bars both spouses from selling, transferring, or concealing community property without written consent or court permission. In practice: get a written agreement (often a stipulation filed by the attorneys) before you sign a purchase contract.

Three ways to handle the house

• Sell before the decree. Both agree on the price, both sign, and the net proceeds are split or held in escrow or an attorney trust account until the decree. This is common when neither spouse can carry the house alone.
• Sell after the decree. The decree orders the sale and the split, and the sale follows it. Simpler legally, but the carrying costs and arguments continue until then.
• Buyout. One spouse keeps the house, refinances to take the other off the loan, and pays them their share of the equity. The keeping spouse has to qualify for the new loan alone.

How the equity is divided

Under ARS 25-318, the court divides community property equitably, which in Arizona usually means substantially equally, and it can consider the debts tied to the property. A simple illustration: a house worth $450,000 with a $250,000 loan has $200,000 of equity before selling costs. If it sells for $450,000 and costs are $25,000, each spouse would receive about $87,500 in an even split, unless the agreement adjusts for things like one spouse paying the mortgage alone for months.

Taxes

A married couple can exclude up to $500,000 of gain on a main home they owned and lived in for two of the last five years, and each spouse can generally exclude up to $250,000 on their own after the divorce, with special rules when one spouse has moved out under a divorce instrument (IRS Publication 523). Ask a CPA before you choose the timing.

When one spouse won't cooperate

A buyer can't force a sale, and neither can one spouse alone. If one spouse refuses to sign or won't allow access, the remedy is the family court, which can order the sale and appoint someone to handle it. Keep records of payments you make on the house in the meantime.

Practical tips

• Agree in writing on the list price or offer you'll accept, who handles showings, and who pays the mortgage until closing.
• Give the title company written instructions for the split. They will follow them exactly.
• Ask for separate signing appointments if being in the same room is hard.
• Keep both attorneys copied on the contract and the closing statement.

Dealing with this now? Sell a house during a divorce

General information for Arizona homeowners, not legal, tax, or financial advice. Huge Cash Offer is a home buyer, not a law firm, lender, or housing counselor.