How to avoid the Dangers of missing Proceeds Distribution in Divorce Real Estate

by | Nov 18, 2023 | Attorney Resources

When divorcing homeowners have agreed to or have been ordered to sell the marital home, it’s important to ensure proceeds division and distribution instructions are included in the sale of house agreement or order to ensure the entire transaction runs more smoothly.

Here are a few of the issues we see when there are no specific orders or directives regarding proceeds:

Image of small scale house on a table sitting next to a set of keys

Sale sabotage

When parties living in the house have no idea if, when, or how much money they will have when the house sells, this often creates fear, uncertainty and anxiety about selling the home. Subsequently, this may cause the in-spouse to avoid communication and/or to lack motivation to prepare the home for sale.   In a slower moving market, home staging, cleaning and preparation is especially important for marketability.  

Furthermore, an anxious in-spouse may attempt to delay or decline showings, deny access to inspectors and appraisers, or delay vacating the home near the closing date. 

Image of couple upset looking over papers

Misunderstanding / Overestimation  

Every homeowner selling his/her house must line up new housing. More often than not, the funds to do so come from the proceeds of the sale.   During the stress of a divorce, owners may not realize or have overlooked the fact that proceeds MAY not be distributed to them immediately upon sale, and instead are to be disbursed to an attorney’s trust account and/or used to first pay off a list of debts.  When an in-spouse does not understand correct timing of distribution, there may be attempts to delay closing/move out due to lack of funds.  

Perhaps the agent assigned to the listing didn’t correctly anticipate the need for a seller leaseback and/or guide the client correctly because he/she didn’t request a copy of the disbursement order.  Additionally, there are numerous scenarios in which a party may overestimate proceeds division, only to discover they cannot afford what they anticipated.  Lack of clarity and information can lead to delays, conflict and disappointment in a variety of ways.

Overhead view of a house under construction

Closing Delays

If there is disagreement or lack of clarity around where the funds go, it will need to be sorted out prior to closing.   Depending on the level of conflict and court involvement, there may be significant delays and associated costs.

Image of 2 people shaking hands in office

How You can make sure Proceeds Distribution is Done Correctly

Appointing a CDRE® as the listing agent on a case is an effective way to promote clarity and understanding, minimize conflict, and ensure that court orders are followed and match the title company’s distribution instructions at closing.

I ask to obtain a copy of the court order and inquire about the proceeds distribution on day one to ensure a smoother transaction and understanding. If there is no agreement, I seek clarification from the parties and counsel until there is one and work closely with my closing officer to ensure there are no discrepancies.  

Feel free to reach out to me if you have any questions related to the real estate aspect of your cases. I appreciate the opportunity to work together.

Request a Call from Meleah