March 01, 2016

Caught in the Middle: Tips for Real Estate Professionals Representing Divorcing Spouses

Jessica Bank Interlandi

Real estate professionals are accustomed to negotiations with brokers and agents. While not always at arms’ length, these negotiations are driven generally by dollars and timing, not emotions.

Representing a husband and wife during a divorce proceeding, however, may place the real estate professional in the unenviable position of referee and confidante. In this instance, the real estate professional cannot do his or her job without understanding why property is being sold, what directives the court has issued regarding terms, and his or her role in the sale process. To this end, the real estate professional should consider the following when involved in such a transaction.

1. Orders Requiring a Real Estate Sale

Illinois law generally does not give a divorce court authority to sell real estate until the end of a divorce case. There are limited exceptions to this rule, however. Moreover, some judges interpret the law to allow them to order the sale of a house in circumstances outside those exceptions. Parties to a divorce also may agree during the divorce case or as part of a final settlement to sell real estate, and that agreement may be memorialized in a court order or a final judgment for dissolution of marriage. The provisions of an order or judgment issued by the court and an agreed order are equally enforceable by the court. The real estate professional should obtain a copy of the relevant order or judgment to understand the terms of sale, and his or her involvement in the process.

2. Engaging a Real Estate Professional/Signing a Listing Agreement

A divorcing spouse may attempt to engage a real estate professional to sell property without the other spouse’s knowledge and consent. This happens when title to property is held only in the name of one spouse. Unfortunately, holding title does not give the spouse a right to sell. In Illinois, unless agreed otherwise, property is characterized as “marital” (belonging to the marital estate and both spouses) regardless of title, until the end of a case. Unless otherwise ordered or agreed to by the parties, marital property of significant value generally cannot be sold during a pending divorce case.

3. Setting the List Price and Reductions

Once engaged, the listing broker or agent can be directed by the court to set the list price and subsequent reductions if the property does not sell within a designated period of time. This requires the broker to provide an opinion of value when the sellers’ interests may not be aligned. Note that a divorce court does not have authority to order a real estate professional to act. When a court “orders” a real estate professional to set a sale price, the court is actually requiring the parties to use the real estate agent or broker’s recommended price as the list price. Sometimes parties and counsel want to keep possible reductions out of the public record. In this instance, the parties may execute a private letter agreement or incorporate a letter agreement into an order by reference only.

4. Showable Condition

Selling for the highest price requires a pristine home in great condition. This may mean staging, organizing, and keeping the home neat, clean, and ready for showings at any time. The court may direct divorcing parties to maintain the home in a condition to be sold at all times. This can be problematic because the listing broker and one or both of the parties may have different standards for showable condition. Moreover, a party unmotivated to sell may impede a sale by refusing to keep the house in showable condition. It is not the broker’s job to referee in this instance. Inform the parties and their counsel of the problem, in writing, and let them hash it out. If time is of the essence, the broker should state that in his or her writing.

5. Court and Deposition Testimony

Occasionally, a real estate broker or agent will be required to appear in court to testify regarding issues such as recommended list price or cooperation of one of the parties to the sale. The only document that can compel a broker as a third party to testify in a civil matter in court is a subpoena. The broker can also be compelled to appear for a deposition by a subpoena for deposition. In these two contexts, the broker is not generally represented by counsel for either spouse, so consult with an independent counsel, particularly if you have never had your deposition taken before. Depositions are taken under oath and penalty of perjury, so they should not be taken lightly. In addition, attorneys sometimes ask questions meant to confuse, but knowing what to expect and how to answer questions can prevent confusion and incorrect answers. Sometimes a party (or the real estate broker’s employer) may object to his or her deposition or testimony. In this case, the issue will be addressed by the court before the deposition occurs.

6. Comparative Market Analysis

CMAs are often used by divorce attorneys as an informal and cost-effective way to determine approximate value. In the context of a divorce case, a real estate agent is generally not called on to render an “expert” opinion of value as to parcels of real estate, and CMAs are not and should not be used in this manner.

7. Communication with Divorce Counsel

In light of the issues attendant to a sale of real estate during a divorce, the real estate professional should obtain contact information for both parties’ counsel when he or she is involved in such a transaction. Information provided through the filter of a divorcing spouse can be incomplete or confusing. The real estate professional will obtain balanced information if he or she contacts both lawyers. To create a written record for later reference and to protect yourself, communicate using email with copies to everyone involved as much as possible.

A real estate professional may need to employ a broader set of resources to complete a real estate sale during a divorce, and understanding his or her own rights and responsibilities in the process is integral to a peaceful and successful transaction.

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Jessica Bank Interlandi

Jessica Bank Interlandi is a Partner at Schiller DuCanto & Fleck LLP. Jessica serves high asset professionals and their spouses to achieve directed and efficient resolution of the most complex family law issues with an emphasis on business valuation, businesses held in trusts and other estate planning vehicles and interstate child custody and child support disputes. Jessica received her Bachelor’s Degree from Georgetown University and her Juris Doctor from Chicago-Kent College of Law. She has been named an Illinois Super Lawyers “Rising Star” in 2010-2011, a Leading Lawyer in 2012-2016 and a Best Lawyer in America in 2015-2016