When a couple decides to part ways, the division of assets becomes a focal point. Real estate, a substantial asset, presents unique challenges due to emotional attachments and financial implications – and of course those challenges end up on the plate of the brokers and agents assisting in these transactions. Here are a few scenarios we’ve received on the PAR Legal Hotline with key takeaways to consider if you are representing clients in one of these transactions.
Scenario No. 1
A husband and wife jointly own a property, but the wife tells you that she has been given “authority” to sell the property as part of the divorce. Who should sign documents such as the listing contract and agreement of sale?
Key Takeaway: Effective Communication and Documentation
I don’t know. And right now, neither do you.
As a listing agent you can never go wrong having all owners of the property sign all the transactional documents. But if one owner says they have complete authority for the other(s), you can’t just take their word for it. Ask for copies of any relevant property distribution agreements, court orders, etc., or get a letter from the attorneys handling the divorce outlining some other agreement between the spouses – and don’t move ahead with the listing until you (and your broker) are confident in what you’ve received. It’s also helpful to check with a trusted title company to see what sort of documentation they would need at closing to be sure the owners will be able to provide it.
Scenario No. 2
The husband owns property in his own name; his wife is not on the deed. The wife lived in the property without her husband for a significant amount of time before it was listed for sale. The husband is refusing to fill out a seller disclosure on the grounds that he hasn’t lived there and insists wife should do it instead.
Key Takeaway: Disclosure – Back to Basics
This is a good example of where a seemingly complicated question gets right back to the basics. The seller disclosure law states that a “seller” is obligated to provide disclosures by filling out a seller disclosure form. There are a number of exclusions – all of which are summarized on PAR Form SPD – but that list does not include “I haven’t lived there in years.” If the husband is the sole owner of the property and is identified as the sole seller of the property, then the disclosure obligation belongs to the husband.
That said, in some situations it might make sense to discuss asking the wife to provide supplemental information to assist in the disclosures. For example, she might agree to turn over all maintenance records or receipts for repairs or upgrades that took place while she lived there on her own, or in some cases it could even make sense for the wife to fill out some sort of supplemental disclosure form. These are all things that could be considered and negotiated on a case-by-case basis and should probably involve discussion with the parties’ attorneys as well as your broker.
Scenario No. 3
A listing agent represents both divorcing spouses as sellers. Multiple transactions have fallen through because the two of them couldn’t agree with each other during negotiations, and now they can’t agree on suggestions from the agent to make the property more marketable. The listing agent has had it up to here and just wants to be done with the listing, but there are still five months to go on the listing contract. Now what?
Key Takeaway: Duties and Contracts
The listing agent has certain legal and ethical duties to both clients, and of course there’s a current listing contract, so the agent can’t just throw up her hands and walk away from the relationship. One option could be to go to both clients and ask them to agree to an early termination of the listing. If they’re agreeable, then great – the listing is over (after you get that in writing, of course). But if the two of them won’t agree to a voluntary termination of the listing, then the broker and brokerage counsel could discuss a unilateral termination – essentially “firing the sellers.” But that shouldn’t be done without considering how it would affect the parties and ensuring that the brokerage has gotten legal guidance on the potential risks with what is basically a breach of contract. And keep in mind that whatever the listing broker does has to be the same with both parties – there’s no real option in this scenario to somehow keep representing one spouse while firing the other one.
Also keep in mind that in some divorces the property distribution agreements/orders specifically state that a property will be listed with a particular agent at a particular price, and they may even contain pre-agreed terms on pricing, seller concessions or other commonly disputed terms. If such a document exists, then the first step to solving disagreements may involve one of the spouses going to the court to enforce the order. Similarly, if the agent/broker wants to get out of the listing, they may want to get court permission if they’re specifically named in those documents.
All these scenarios are from the point of view of a listing agent, but buyer agents have just as much reason to be concerned about transactions involving a divorce. If a buyer agent becomes aware of the divorce, it’s generally going to be a good idea to discuss that with their buyer clients so they’re aware of the problems that could arise in negotiations – sellers disagreeing on terms; possible delays for multiple attorney reviews; and so on.
Obviously, it is difficult to work with parties who are not on the same page. However, emotions run high during divorces, and properties are often more than just structures—they hold memories and sentimental value. Recognizing and empathizing with the emotional aspects of selling a property due to divorce is crucial. Building trust with both parties and maintaining a neutral stance is important. It allows for smoother communication and negotiation, creating an environment conducive to making informed decisions.