Divorce and its Effect on Your Real Estate Closing

Your buyer or seller’s divorce or pending divorce can create potential issues in an otherwise smooth real estate transaction. Below are a few examples to watch out for.

1) Seller A purchased a property prior to getting married to Seller B. They then both lived in the property and it became their homestead.

It is important to remember in this case that Seller A is the only “Seller” to list on a purchase contract. However, Seller B will also need to attend closing in order to sign the deed conveying the property to the new purchasers because the property had been the homestead of Seller B.

2) Seller A and Seller B enter into a contract to sell their home that they own as husband and wife and their divorce is pending. Their divorce is finalized prior to the closing date. In this scenario, it is important that the Sellers disclose that they are divorced immediately. First, the closing agent will need to review the Marital Settlement Agreement to ensure compliance with its terms. Additionally, a new title search will need to be performed. The reason for this is, when a husband and wife own a property together as husband and wife (tenancy by the entirety) they have taken title in a way that protects each spouse from individual creditors of the other spouse. If there had been a properly perfected judgment against one spouse, it would not attach to the property. However, once the couple gets divorced, they are no longer protected from each other’s creditors as their tenancy by the entirety is automatically severed. Now, they are tenants in common and any properly perfected judgment against one spouse will need to be paid off in order to sell the property.

3) Buyer A and their spouse are in the process of divorce. Buyer A decides to move out and purchase their own primary residence with financing.

In this case, it is important to let Buyer A know immediately that purchasing a new primary residence with financing before their divorce is final is not as easy as it may seem. Here, Buyer A’s spouse will be required to sign the mortgage and some of the other documents for Buyer A’s purchase requiring Buyer A’s spouse at closing at leaving Buyer A to deal with their soon to be ex-spouse having an interest in their new home.

In conclusion, if you have a buyer or seller that is in the process of getting divorced or who have been recently divorced, it is important to confirm where they are in the process and to communicate any changes as the closing process progresses as soon as possible. As always, if you have any questions about the foregoing, Contact your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jessica Featherstone, Esq. jfeatherstone@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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