They say that the wheels of justice turn very slowly, and in that regard, we should be aware of the contractual conundrums that divorcing litigants face when selling their real property.
In every real estate transaction, there are generally two contracts the owners enter into:
1) a Listing Agreement with the brokerage, and 2) a Purchase Agreement with the buyers. Each contract comes with its own terms and timelines, and while I could practically write a book on this issue, I’ll get straight to the most common issues when advising clients, drafting agreements, or requesting orders:
• Disclosures: Upon acceptance of an offer, a Seller must provide a Buyer with known material facts (“disclosures”) within a certain timeframe, usually within a week or less. This boils down to paperwork that needs to be filled out, and when one party does not comply within the specified time period, the Sellers are in breach of the contract.
• Inspections / Appraisals: A Seller has a contractual duty to make the house available for inspections, including appraisals. After all, buyers have a right to inspect the property, and a loan usually requires an appraisal. If a Seller does not allow access to the property within the contractual timeframe (usually within 7 days or less), this puts them in breach of the contract.
• Personal Property: The house must be delivered to the Buyer free and clear of personal property, unless there is an agreement to the contrary. If the party occupying the house simply packs up “their” stuff and moves out, and the “out” spouse does not retrieve his/her belongings prior to the buyers taking possession, the sellers are in breach of the contract.
• Occupancy: There is a clear date and time that possession is turned over to the buyer(s). Our clients sometimes think they can simply notify the buyers that they’ll “need more time,” and that is not the case, unless there is an express agreement by the parties memorialized in writing as an addendum to the purchase contract. Delayed occupancy or post-closing occupancy is not a unilateral decision. Sellers that fail to vacate the property on or before the closing date, is a breach of contract as well.
What are the damages when clients breach the purchase contract?
It all depends, but they can be significant. For example, buyers lock in their interest rate for a certain period of time. Should the divorcing sellers create delays that cause the buyers to exceed that rate lock deadline, the interest rate increases. Extrapolate that increase over the life of a 30-year loan, and we can be looking at six figures in possible damages.
Another example is when buyers have made arrangements to move. They’ve given notice at their current residence or sold it. They have movers, contractors, designers, furniture delivery, etc. all lined up and have made various deposits. When there is even a one-day delay, all of this gets unraveled and damages ensue and in many cases those damages could be in the thousands of dollars.
Also, if a Seller has left personal belongings behind, there is a cost to hauling it away — thousands of dollars, depending on what’s been left behind.
Contractually, the parties on title are the ones liable for the breach and damages. The liability can extend to both, even if one has been completely cooperative. If there’s only one party on title, that is the party with whom the purchase agreement is entered into, and will bear all the contractual liability — even if they are compliant but the other spouse is causing them to be in breach.
As a CDRE™, part of my role is to keep attorneys informed of the process. If things get to a point where our clients can be facing a breach of contract, I will be in communication with you. A lot has to happen in a typical 30-day closing cycle, and we have very little time to resolve these issues before it becomes a liability. If you see an email with “URGENT” in the subject line, now you know why!
Know that I also put our clients on a timeline from day one. They are aware of these deadlines, and I will always work to resolve these issues before making you aware of them.
I have been a real estate professional for over 20 years. I am a Certified Divorce Real Estate Expert (CDRE®) and a Certified Probate Real Estate Specialist (CPRES®). I work with Divorce and Probate law firms, and their clients to ensure the best and most profitable outcome every time.
If you have a case involving the sale or transfer of real property that needs to be listed, please visit my website https://madelinespino.com
I can also be reached directly at madelin@madelinespino.com, or 954.362.5828 or 305.205.5232.
My goal is to make your life easier.