Maryland

Should You Sell the House Before or After the Divorce?

No single answer fits every couple. Selling before the decree keeps one file and one set of signatures, and a joint return qualifies for up to $500,000 of excluded gain under IRS Topic 701. Selling after sets up to $250,000 per owner. Run a net sheet and the carrying cost before you pick a date.

By Marc Cormier

Licenses: Maryland #620443 | Virginia #0225175181 | DC #SP98365998 | Berkshire Hathaway HomeServices

27+ years in real estate. 800+ closed transactions.

Certified as a Certified Divorce Real Estate Expert (CDRE) in 2014.

Last updated: October 2, 2026

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Should you sell the house before or after the divorce is final?

There is no one right answer. There is a right answer for your house, your agreement, and your taxes. Get three things first: a net sheet, your tax professional's read on the exclusion, and your attorney's view of your agreement.

Marital property is property either spouse acquired during the marriage. Maryland Family Law Article section 8-201 defines it. The timing of the sale does not change that. It changes who signs, who holds the money, and how much of the gain the IRS lets you exclude.

What changes if you sell before the divorce is final?

You keep one file. Both owners sign the listing agreement, every offer, and the closing papers when both names are on title. You and your spouse make every decision together, and the court has not yet divided the property.

Maryland Family Law Article section 8-208(a)(2) lets the court act on possession and use of the family home while the case is pending. Section 8-208(c) lets the court order either spouse to pay the mortgage, insurance, taxes, and similar costs. Ask your attorney whether any order in your case limits a sale before you list.

On taxes, IRS Topic no. 701 lets you exclude up to $500,000 of gain if you file a joint return with your spouse and you meet the ownership and use tests.

What changes if you sell after the divorce is final?

Each spouse is single for the sale. The $500,000 joint figure no longer applies, and Topic no. 701 sets the limit at $250,000. Your agreement or the court's order decides who lists, at what price, by what date, and how the money splits.

Section 8-205 lets the court transfer a jointly owned principal residence to one spouse, authorize a buyout, or both. A sale after the decree means the spouses still own the home together, or one spouse bought out the other and sells alone.

If the decree leaves price, repairs, or showings open, you and your spouse negotiate them again, usually with attorneys. That costs time and money.

What do the tax numbers look like?

Made-up numbers. A home bought for $300,000 sells for $700,000. Assume the gain is $400,000 ($700,000 minus $300,000) and every owner meets the ownership and use tests. Your real gain depends on improvements and selling costs. Ask your tax professional.

Case	Who sells and when	Exclusion	Taxable gain on $400,000
A	Both spouses, sold while filing a joint return	$500,000	$0
B	One spouse keeps the house after the divorce and sells alone later	$250,000	$150,000 ($400,000 minus $250,000)
C	Both still own it, sold after the divorce, gain split evenly at $200,000 each	$250,000 each	$0 each

Case C rests on an assumption. It assumes each former spouse applies the $250,000 limit to a half share of the gain. Topic no. 701 does not say that. Ask your tax professional before you rely on it.

IRS Publication 523 adds one rule for the spouse who moves out. If you own the home and your former spouse lives in it under a divorce or separation instrument, you still treat the home as your residence for the exclusion. Maryland Family Law Article section 8-208(d) says an order of sole possession does not affect the other spouse's right to claim the home as a principal residence for tax purposes.

What this shows: waiting does not always cost you. The larger tax bill shows up when one spouse buys out the other and sells alone later.

How do the two paths compare?

Question	Sell before the decree	Sell after the decree
Who signs	Both owners	Both owners, if both are still on title
Exclusion under Topic no. 701	Up to $500,000 on a joint return	Up to $250,000 each, if each meets the tests
What controls terms	Your written agreement, then the court	The decree or your settlement agreement
Carrying costs	Run until closing	Run until closing
Best when	You agree on price and the split	The agreement already sets price, date, and split

When does waiting make sense?

Waiting makes sense when a specific reason beats the monthly cost. Check each one against the numbers.

A parent needs the children to stay in the home for a set time. Section 8-208 lets the court weigh the best interests of any child.
One spouse plans to buy out the other, and the lender has not yet approved the loan.
Your tax professional shows a clear tax reason to wait.
The agreement already names who lists, at what price, and by what date.

Do not wait for a perfect price. The market punishes hesitation.

What does waiting cost?

Made-up numbers. Monthly carrying cost: mortgage $2,300, property tax $600, insurance $250, utilities $350. Total: $3,500 a month.

Months waited	Cost ($3,500 x months)
3	$10,500
4	$14,000
6	$21,000
12	$42,000

Compare that to the tax difference in Case B. In the made-up example, $150,000 of gain exceeds the exclusion. A long wait costs money every month. A tax saving, if there is one, arrives once. Put both numbers side by side before you choose.

What do you settle first?

Get a net sheet. It shows what each spouse takes home.
Ask your tax professional which exclusion applies to your facts.
Ask your attorney whether any order or agreement limits a sale.
Write the terms down: price floor, repair cap, who pays carrying costs, who holds the proceeds.
Choose the date. Do not let the date choose itself.

What this means for your house

Selling before the decree keeps the joint $500,000 figure available. Selling after sets $250,000 per owner.
Topic no. 701 and Publication 523 set the tax rules. Your tax professional applies them.
Carrying costs run every month. Add them up.
Section 8-208 lets the court act on use of the home and expenses. Ask your attorney what applies.

Where this goes wrong

I have seen this mistake before. A couple waits for the divorce to finish so the tax picture is clear. Nobody runs the carrying cost. Eight months later the savings from waiting are smaller than the payments they made.

Waiting for the perfect price. The market punishes hesitation.
Listing before the terms are in writing.
Skipping the tax conversation until after closing.
Letting one spouse stay and stop paying while the sale waits. Ask your lender what that does to the loan.
Choosing on emotion. Emotion costs people money.
Picking a date without a net sheet.

This is where people usually get hurt. They choose the timing first and run the numbers second.

Local note for Montgomery County: The Montgomery County Circuit Court runs a Family Law Self-Help Center. It is a free walk-in clinic staffed by attorneys, in the South Tower, First Floor, Room 1500. It gives general legal information or limited legal advice on divorce, custody, and related matters. You still pay case fees and costs. Source: https://www.montgomerycountymd.gov/circuit-court/services/family-law-self-help-center

Questions about selling before or after the divorce

Can we sell the house before the divorce is final?

Yes, if both owners agree and sign. Put the sale terms in writing first and have each attorney review them. Ask your attorney whether any court order or agreement in your case limits a sale before you list. Ask your title company and your attorney who holds the proceeds and when each spouse receives them.

Is it better to sell before the divorce is final?

Compare the cases before you pick a date. Topic no. 701 sets up to $500,000 on a joint return with your spouse and up to $250,000 otherwise. In a made-up example, a spouse who keeps the house and sells alone later faces the $250,000 limit, not $500,000. Run your own numbers with your CPA before you accept a closing date.

How does the $500,000 versus $250,000 exclusion work?

The $500,000 figure applies when you file a joint return with your spouse. Either spouse meets the ownership test and both meet the use test individually. Otherwise Topic no. 701 sets up to $250,000. Whether two former spouses each apply $250,000 to a half share is a question for your CPA.

What do the ownership and use tests require?

Topic no. 701 says you must have owned the home at least 24 months of the last 5 years before the sale. You must have used it as a residence at least 24 months of the previous 5 years. On a joint return, either spouse meets the ownership test and both meet the use test individually.

Can one spouse refuse to sell?

If both names are on the deed, neither owner sells alone. A spouse who refuses blocks the sale until the spouses agree or the court acts. Try written terms, a valuation tiebreak rule, and mediation first. Section 8-205 gives the court tools for a jointly owned home. Your attorney explains how they apply to you.

What does it cost to carry the house while it sits unsold?

Carrying cost is the monthly total of the mortgage payment, taxes, insurance, and utilities. In a made-up example at $3,500 a month, four months cost $14,000 and six months cost $21,000. Your number depends on your loan and your house. Add it up before you list.

What is a net sheet?

A net sheet shows what the sale puts in each spouse's pocket after the mortgage, commissions, repairs, and carrying costs. In a made-up example, $750,000 minus $300,000 minus $45,000 equals $405,000. Split evenly, each spouse gets $202,500. Section 8-205 contains no 50/50 rule. I run a net sheet before you list.

Do you need a divorce attorney?

You should have your own. I am a real estate agent. I do not give legal advice, and I do not work for one spouse against the other.

I am not affiliated with any law firm. I do not recommend one attorney over another. Your spouse needs their own attorney, not yours.

If you need to find one, start with the bar association referral services:

Links open in a new tab.

What an attorney handles	What I handle
Who gets the house and the money	The value of the house
The marital settlement agreement	The net sheet
Court orders that affect the sale	Listing, showings, offers, and closing
Custody, support, and everything outside real estate	A written record of every showing and decision

General information only. Not legal, tax, or financial advice. The referral services are independent of me. I do not guarantee any attorney's work or results.

About the Author

Marc Cormier