It’s Not Over Until It’s Really Over…Selling Real Estate After A Divorce

As you all know, real estate professionals constantly wear an abundance of different “hats.” Working in the real estate world demands that real estate professionals have at least a minimal understanding of a variety of topics including, but not limited to, family law, wills, trusts and estates. Even with divorce rates slightly declining, it is important for real estate agents to have a basic comprehension of how divorce can affect a real estate closing.

From a closing agent’s perspective, a title search is conducted immediately after a contract is received. Upon receipt of the title commitment, there are typically two requirements from the title underwriter that signal there are divorced sellers that own the property:

    1. “Review and record a certified copy of the divorce decree and property settlement agreement, if any. Further requirements may be necessary upon the review thereof.”
    2. “Compliance with the terms and provisions of the Property Settlement Agreement between Divorced Party 1 and Divorced Party 2, as it relates to the property herein.”

Upon seeing such requirements, the closing agent will reach out to the sellers to put them on notice to begin to retrieve their divorce paperwork. But, as agents, what can you do to prepare your divorced sellers to ensure a smooth closing and avoid the need for a closing extension?

    1. Have a conversation with your seller(s) about the current ownership of the home. Title may still be vested in both of the ex-spouses names. If that is the case, both parties will have to execute the warranty deed. Not all ex-spouses have open (or friendly) communications, so if title to the property is still vested in both of their names, it might be a good idea to inform your client right away that the ex-spouse will also need to sign.
    2. Have the seller(s) pull out all documents from their divorce. A closing agent will always need to review and comply with the provisions of the Martial Settlement Agreement (the “MSA”).

a. Sometimes, the terms of the MSA have not been fully complied with and additional steps may need to be taken. For example, the MSA might call for one ex-spouse to quit claim the property to the other ex-spouse by a certain date. If there is no record of a quit claim deed having been executed and recorded, one will still need to be executed and an updated title search conducted. When a husband and wife own a property together as tenants by the entirety, they benefit from enhanced creditor protection that is lost when the tenancy by the entirety is dissolved by the divorce, and they then own the property as unmarried individuals.

b. Even if the terms of the MSA have been complied with in regards to transferring title, very frequently an ex-spouse is still owed proceeds from the sale. A majority of the time, MSA’s are pretty straightforward with how proceeds are to be disbursed. However, there are situations where a MSA is highly complicated and intricate. For example, a MSA might call for the production of receipts of for utilities, insurance, and HOA payments, with such payments being subtracted from any rental payments that one ex-spouse might have made. Both ex-spouses will need to sign a written disbursement authorization, agreeing to the split of the proceeds prior to closing. As you can imagine, this takes time; if the sellers know they have an intricate MSA, it would be wise to initiate the process as soon as the contract has been executed.

c. Lastly, it’s possible that a divorce proceeding might have been filed in Sarasota County, but the property is located in Manatee County (or some other county). In order to be compliant with the MSA and the title commitment, a certified copy of the final judgment of dissolution of marriage will need to be recorded in the county where the property is located.

If you are working with a seller that is a) in the process of getting divorced, or b) who has recently been divorced, or c) who you know has been divorced for some time, it is important to begin preparing them and the closing agent as soon as possible for the chance that additional tasks might be required in such transactions. As always, if you have any questions about how divorce can affect a real estate closing, please contact one of the attorneys at Berlin Patten Ebling, or consult with your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Malloy Moretti, Esq., mmoretti@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.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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