Q: I will be entering into a listing agreement with a married individual who may soon be getting divorced. I also have a listing with a couple who is now getting divorced. What issues might arise?
A: Involvement with a married person who might get divorced or who is currently going through a divorce presents many issues which can affect your ability to receive your commission. Part I of this article identifies some of these issues. Part II of this article, to be published next month, continues to identify issues and discusses some of the general solutions.
Automatic Restraining Order
When a divorce is started and a husband or wife is served with divorce papers, there is an automatic restraining order in every case which prevents either party from transferring, encumbering, concealing or in any way disposing of, without the consent of the other party or a court order, any “marital property.” Even if a residence is titled in the name of only one spouse, it may still be considered marital property.
The spouse who wants to prevent the sale of the property may file and record a notice of lis pendens. The lis pendens notice puts the public on notice of the pending divorce lawsuit and clouds the title to the real estate. A lis pendens notice will tie up the property for 45 days following a court order releasing the lis pendens notice. As a result, closing may be delayed or a buy/sell contract may fail because of the delay.
Either spouse may ask the court to lift the automatic restraining order so the residence can be sold. However, unless the parties agree to the sale, the court may not lift the restraining order unless there are extreme financial circumstances. If your seller tells you that he or she has court permission to sell the home, it is a good idea to get a certified copy of a court order allowing the sale, to be sure that there really is an order allowing the sale to take place. Of course, the order allowing the sale will not alleviate any delays in closing caused by the recording of the lis pendens notice and possible appeals from an order allowing the sale.
Conflicting Direction
Divorcing couples often have different goals concerning the sale of a marital residence. For example, a wife with children who resides in the residence may not want it to be sold and may be willing to wait for a high offer, but the non-occupant husband may want the house sold as quickly as possible, even if an offer is low. Under Colorado law, a seller’s agent has a duty to promote the interests of the seller with the utmost good faith. If you are acting as a seller’s agent for a divorcing couple with divergent interests, you may not be able to fulfill your duty to each spouse. If the sellers will allow you to do so, it is better for you to serve only as a transaction-broker when representing a divorcing couple. However, even serving as a transaction-broker could be problematic if each spouse makes differing demands upon you. It’s a good idea to document instructions in writing and get written approval from the husband and the wife on all decisions affecting the sale.
In addition, divorcing spouses often do not share information with each other. Unless a spouse has provided you with a valid power of attorney delegating decision making authority (concerning the sale of real estate) to the other spouse, all offers should be communicated separately, in writing, to each spouse or his or her lawyer.
The Great Custody Myth
Tying in child custody issues with issues concerning home ownership is a common error made by divorcing couples. Child custody does not impact the decision as to whether the marital home should be sold or whether a spouse should be allowed to remain in the residence. An award of sole legal custody means that the sole legal custodian makes major decisions concerning the child’s health, education and general welfare. An award of joint legal custody means the parties are required to jointly make major decisions concerning the child. If a divorcing spouse tells you that the house can’t be sold because he or she lives in the house as sole legal custodian for the child, the divorcing spouse is providing you with incorrect information.
Read Part II of this article.
