Realtors need to be acutely aware of a divorce situation when doing a short sale, or when selling a house in general. Regulations vary by state; however, in the state of Texas, if you were married at any point that you owned the house, the ex-spouse has a claim to the house. That’s right – even if the parties have been divorced for a decade, if ownership of the house was not included in the divorce decree, then both former spouses have a claim to the property.
For example, Homeowner A bought the house while he or she was single, got married, got divorced, and then went to sell the house. If the house was not dealt with properly in the divorce decree (giving one person full ownership), both parties have to sign their agreement to sell the house.
In a short sale, this can cause complications, because the seller does not receive any money and the bank is taking a loss. Getting the ex-spouse to sign can be difficult because they will not receive any financial benefit, and may not feel like doing a favor for their ex.
When you’re dealing with a short sale, always ask up front whether the homeowner was ever married during the period they owned the house. If they were, ask whether the property was dealt with in the divorce decree. Often, people make a big deal over who gets the fine china or the Beatles albums, but they don’t talk about the house. If it wasn’t specifically awarded to one spouse or the other, be prepared to have both spouses come to the table at closing.
In the case of an ugly divorce, it’s best to deal with each former spouse completely separately. Schedule a separate time for each individual to come to the closing, so they don’t even cross each others’ paths as you get the signatures. It’s also wise to get the “most angry” spouse in to sign first. We had one case where the husband refused to sign the documents because the wife had already signed the paperwork. He still felt tremendous animosity toward her and didn’t want to do her any favors, so he dug in his heels. As a result, the short sale fell through.
If you learn that your short sale client is divorced, make sure that you know whether the seller was married at the time he or she owned the house, and whether the house was addressed in the divorce decree. Asking questions upfront can help you avoid delays at the end of the short sale process and avoid unexpected drama at closing.
If you have any questions about managing a short sale for a client who is divorced, or if you are divorced and considering a short sale on your home, please call us at 972-342-0011. A member of our team will be happy to assist you.