Owning a house is a big deal, financially. So, what happens to your house during a divorce in Chicago, Illinois?
What Happens To The Marital Home During An Illinois Divorce?
Most people’s biggest asset is their house. However, the marital home is typically held by two people as a couple because, as a couple, they were eligible for the mortgage associated with the house.
Outside of the tax advantages of paying a mortgage every month, a mortgage is also an enforced savings program. If you own your house and have lived in your house for more than two years you don’t even have to pay the capital gains tax on the increased value of your house at the time of sale.
During a divorce, one party typically moves out of the marital home. I recommend my clients do this as nothing good can come from living with someone you are trying to break up with. It’s bad enough seeing a toilet seat left up by someone you love; imagine your reaction when someone you hate does that…or worse.
Moving out of the marital home creates an opportunity for gamesmanship for both parties.
The party still living in the house can ask or expect the other party to contribute to half the mortgage.
The party who is not living in the house can watch the equity of the marital home increase with every mortgage payment and a natural increase in the value of the real estate while making no contribution to the expenses of the house.
In either of these situations, the party getting the benefit of the bargain can purposely extend and delay the finalization of the divorce for at least two years.
The solution to this problem is to file a Motion To Sell The Marital Residence.
Motion To Sell The Marital Residence In Illinois
Illinois statutes allow a court to “make judgments affecting the marital property, as may be just and may enforce such judgments by ordering a sale of marital property, with proceeds therefrom to be applied as determined by the court” 750 ILCS 5/503(i).
But, this usually occurs at the end of the case. To sell the house during the case, you’re going to have to file a motion for temporary relief. The statute allows for “other appropriate temporary relief including, in the discretion of the court, ordering the purchase or sale of assets and requiring that a party or parties borrow funds in the appropriate circumstances.” 750 ILCS 5/501(a)(3)
The judge typically says, “You will sell the house eventually. So, let’s get the sale process started now.” This is especially true as springtime approaches.
One party may object and remind the court that the division of assets is relative to all assets and therefore no sale should occur before all assets are accounted for and valued.
“[S]ection 501 authorizes the sale of an asset prior to final dissolution, but that is appropriate only in extraordinary circumstances, where such a sale is required to otherwise maintain the status quo prior to final dissolution….A court should not use section 501(a)(3) to unnecessarily adjudicate the property rights and claims of the parties prior to entry of the decree of dissolution. The sale order [of a marital home] does not maintain the status quo, and it, in fact, constitutes a permanent injunction without adequate justification. Suffice it to say, the allocation of the marital residence will need to be addressed in the final dissolution, but it is injudicious (absent extreme circumstances) to order the sale of marital assets on an interim basis.” In re Marriage of Gabrys, 2023 IL App (1st) 221763
If the purpose of the ordered sale of the house is to pay attorney’s fees that is impermissible.
“[A] party cannot be required to sell real estate to pay attorney fees.” In re Marriage of Goesel, 2017 IL App (3d) 150101, ¶ 20
If the sale of the house proceeds, that ordered sale is immediately appealable and can be stayed until the appeal is ruled upon (which could be months or even years)
“[A]n order compelling a party to sell property is an injunction appealable under Illinois Supreme Court Rule 307 [and is therefore immediately appealable]” In re Marriage of Roman-Kroczek, No. 1-21-0613, 6 (Ill. App. Ct. 2021)
If the house is not marital property, then the house shall not be sold before the divorce is finalized. If the house is not marital property, the house will probably not be ordered sold at all as the court must award it to the person who has the property in their name.
“[T]he court shall assign each spouse’s non-marital property to that spouse” 750 ILCS 5/503(d)
Suppose one party wants to keep the house in the final settlement. In that case, that party usually offers a global settlement very soon after the filing of the Motion To Sell The Marital Residence.
But, in the end, if either party wants the marital home sold…that house will be sold unless it is guaranteed that one party can buy the other party’s equity share.
If the parties agree on a real estate agent to represent them both (they are still co-owners) then that real estate agent will sell the house with the cooperation of the parties.
If the parties do NOT agree on a real estate agent, the court will appoint a real estate agent. I, personally, always select the BeRealty real estate brokerage for my Chicago divorce house sales. They have been beyond reproach in respecting to both parties even while representing a party who was hesitant to sell.
Listing Letters In An Illinois Divorce
When a marital house is ordered to sell, there is another opportunity for gamesmanship…by the buyer. A savvy buyer would look up the sellers on the Cook County Clerk Docket to see if they were, in fact, getting divorced. If the buyer subsequently looked up the order to sell the marital house, the buyer could simply wait out the parties until the court ordered them to lower the price of the marital house.
Luckily, there’s a solution to this problem. The parties’ lawyers can reference a “listing letter” in the order to sell the marital home. This “listing letter” will describe when and how the price of the marital home shall be reduced. Example: “Every two months the house is not sold, the parties shall reduce the price by $ 5,000.” If the listing letter is merely referenced and not publicly available in the order, the buyer has no idea how long he or she can wait out the seller.
Escrow After Selling A Home During An Illinois Divorce
When the marital home is finally sold and the divorce is not yet finalized, one of the lawyers (or perhaps the attorney in charge of the sale of the real estate) shall hold the proceeds in escrow until the final division of marital assets is made or by temporary agreement of the parties.
Capital Gains When Selling A Home During An Illinois Divorce
Another advantage to selling the marital home before a divorce is finalized is a larger portion of the proceeds can be free from capital gains tax. A single person pays no capital gains tax on the first $ 250,000 of gains from the sale of their primary residence. A married couple, however, pays no capital gains tax on the first $ 500,000 of gains from the sale of a marital home. So, it might be dissipation of assets to NOT sell the house while the parties are still married.
When the marital home is finally sold, in my experience, both parties have shaken the cobwebs off and are ready to move on to the next chapter of their lives. Both parties move into smaller separate places. If there are kids, the kids get used to the new normal. People stop holding onto the past and start dating. The final settlement is usually entered very shortly afterward.
If you have questions about selling your marital house during a divorce call my Chicago Law office today for a free consultation.
BeRealty is an amazing real estate brokerage whether you’re getting divorced in Chicago or not. They’re just 4 miles from my office. Directions below:
