Representing a seller who is experiencing marital difficulties poses special concerns for real estate professionals. It is common for divorcing couples or couples who are about to be divorced to have differing interests in connection with the sale or other disposition of real estate. As agent or broker, you should be sensitive to those differing interests and how they affect the prospects for closing the deal. A few practical tips on how to deal with unhappily married sellers are outlined below.
Whose House Is It?
During pre-divorce disputes, one party may want to sell a residence, while the other party wants to keep it. Consequently, a non-owner spouse may try to list the house, without the owner-spouse’s knowledge or consent. Unfortunately, brokers don’t always know when a client is involved in a dispute with his or her spouse. To avoid problems at a later date, the listing broker should always confirm the identity of the record owner of the property when the listing contract is signed. This can usually be accomplished by an O & E search.
The “Automatic Stay” in Divorce Cases
In most divorce cases, there is a temporary injunction which prevents either party from selling, transferring, conveying, encumbering or otherwise disposing of any “marital property,” without the consent of the other party or an order of the court, except in the usual course of business or for the necessities of life. Even if property is only titled in the name of one spouse, the property could still be deemed “marital property.” Consequently, a closing could be aborted at the last minute by a court order “staying” the sale. A practical way to avoid this problem would be to have a written consent to list and sell from both the husband and the wife, whenever you are dealing with a married couple, regardless of who has title.
Loyalty to Husband or Wife?
Colorado law imposes duties of loyalty, “utmost” good faith and fidelity upon a single agent engaged by a seller or landlord. This includes a duty not to disclose, both during and after the agency relationship, confidential information obtained as a result of the agency if such disclosure would be to the principal’s disadvantage or prejudice. When couples are divorcing, it might be in one party’s best interests to accept a low offer on a sale, while it would be to the other party’s advantage to wait for a higher offer. For example, a wife with children in possession of a house may want to try to stay in the house for as long as possible, while a husband not in possession of the house may want to sell the house without delay. How can an agent reveal offers to two principals with conflicting interests, while at the same time not violate his duty of loyalty? A practical way to deal with this is to follow the law and clearly confirm in writing with your clients that any and all offers will be conveyed to both the husband and the wife, and that each party consents to such disclosure. This written confirmation should be executed at the time the listing contract is signed. The confirmation should include a recommendation that each party seek independent legal counsel if they have any questions regarding the confirmation.
Communications With Husband or Wife?
Pre-divorcing couples and divorcing couples may not effectively communicate with each other, and may even choose not to communicate with each other regarding the sale of property. Consequently, communicating offers and other information to only one spouse could have serious consequences for a real estate professional. To minimize the risk of “lost” messages, real estate professionals should strive to make sure that all communications to unhappy married couples (whether they are pre-divorce, going through a divorce or simply appear to have strained communications) be communicated to both spouses and their attorneys in writing.
There are many traps into which real estate professionals representing distressed married couples can fall. Written disclosures and confirmations in writing to husbands, wives and their attorneys can reduce the risk of claims and maximize the chances of a successful closing.