When divorce complicates a home sale

A spouse who moved out years ago could still have the power to delay a home sale, even when only one person’s name appears on the property records.

In Florida, separation does not change a couple’s legal marital status or eliminate potential homestead issues, real estate attorney Lew Oliver said at the recent Florida Real Estate Legal Summit. That means a pending or completed divorce can raise unexpected questions about who must sign, whether an earlier deed is valid and how the sale proceeds must be handled.

For Realtors®, the most important step is recognizing stumbling blocks early and involving a title professional or attorney rather than trying to interpret divorce documents themselves, Oliver said at the summit, which was sponsored by Florida Realtors®.

“The key takeaway from this one on the divorce side is, whenever there’s a divorce involved, it’s always really important to get an attorney involved very early on,” Oliver said.

That review can determine who must sign the documents, whether the sale can move forward and whether a current or former spouse has any rights to the property or sale proceeds.

Separation does not end a spouse’s role

Florida does not recognize legal separation as a status that changes a spouse’s homestead rights or interest in a real estate transaction, Oliver said.

A property owner who says a spouse has been gone for years may still be legally married. That can become a closing problem if the owner previously represented to the agent, title company or lender that they were single.

Oliver described two closings in which sellers claimed to be single but were still married. One was resolved after the spouse was contacted and signed the necessary documents. The other closing had to be delayed.

For agents, that means “we are separated” should not be treated as the same thing as “we are divorced.”

Timing can affect whether a deed works

Homestead rules can also complicate attempts to transfer property while a divorce is pending.

Oliver said spouses sometimes sign a deed before the divorce is final because they have agreed that one person will receive the home. However, a deed intended to transfer homestead rights may not accomplish that goal if it is signed while the couple is still married.

“Many times, I have to tell the unhappy client, sorry, that is no good,” Oliver said.

A deed that was signed too early could create problems later when the owner attempts to sell or refinance the property.

One name on the title may not settle the question

A spouse does not automatically receive an ownership share simply because the property is homestead, Oliver said. Homestead may provide an occupancy right without providing a right to the sale proceeds.

However, the spouse’s signature still may be needed while the couple remains married. In a difficult divorce, obtaining that signature can become a practical obstacle even when the spouse is not otherwise entitled to the proceeds.

That makes it important to determine marital status and homestead issues before the transaction reaches the closing table.

Old divorce agreements can affect a new sale

A marital settlement agreement or court order can also continue affecting a property years after a divorce is completed.

Oliver said an agreement might award one spouse possession or title but also require the home to be sold after the couple’s children reach a certain age. It could require the proceeds to be divided with the former spouse or direct one spouse to refinance and remove the other from the loan.

Those provisions may remain relevant even when only one former spouse appears on the deed.

“One of the things that constantly surprises my Realtors is that sometimes we are tripped up by marital settlement agreements that might be a decade old,” Oliver said.

A title professional may need to review the entire agreement, not simply the portion awarding the property. In some cases, the agreement can function like a claim against the property and require the former spouse to receive part of the sale proceeds.

Court orders also must be read carefully. Oliver said some orders include language that transfers title if a spouse fails to sign a required deed, while others may not resolve the title issue as clearly.

Recognize the issue and seek guidance

Realtors are not expected to determine the legal effect of a deed, divorce order or marital settlement agreement, he said. Their role is to identify warning signs and bring in someone qualified to review them.

Those signs can include:

• A seller who is separated but not divorced
• A deed signed before the divorce became final
• A former spouse who remains on the title or mortgage
• A settlement agreement that addresses the home or sale proceeds
• Questions about whether the property is homestead
• Uncertainty about who must sign the contract or closing documents

“I’m not trying to teach you how to answer these questions,” Oliver said. “I’m teaching you how to recognize them.”

Bringing in the closing agent or attorney early can help agents identify who must participate in the transaction and address problems before they delay or derail the closing.

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