I recently represented a couple in a divorce case that included several real estate transactions. The first transaction was routine with a divorce, the couple wanted to sell their home. This went smoothly, with an agreement between the parties as to the equity (included down payment and principal payments) and capital gains (increase in value since the purchase date to anticipated final date of divorce), a distribution of the equity, one party buying out the other parties equitable interest in the home, and the subsequent sale of the home after the divorce was final.
The second transaction was met with resistance by mortgage underwriters and buyers real estate agent (I deferred being the Real Estate Agent in this transaction due to potential conflict of interests).
The divorce suit was ongoing when one party wanted to purchase residential real estate in order to move out of the community home. This party worked with a Real Estate Agent and quickly found a highly desirable home at a fair price. The other party of the divorce did not want to sign any documents related to the purchase nor assume any liability associated with the new home purchase.
In Texas and most community property States, it is common that both spouses, during a marriage, sign documents at closing. Although this is the general rule, it is not a requirement for all Real Estate transactions, as I will discuss. There are several reasons why it is desirable/required for both spouses to sign at closing: community property, homestead, financial liabilities, insurance claims, and the complications that could arise from various law suits.
In this particular instance, the Real Estate Agent told both me and my clients that both spouses had to sign at closing. This Real Estate Agent insisted that both spouses had to sign at closing, and that I could then designate the property in the Final Decree of Divorce; this is one approach. Since one party did not want to sign closing documents, and it was not a conflict of interest between the divorcing parties, my clients desires were best served by not having both parties sign at closing.
The Real Estate Agent continued to excite the divorcing parties, and became increasingly frustrated with me telling him that spouses during a marriage do not have to sign at closing. He even threatened to file a grievance with the Texas State Bar. I calmly responded that his commission and license was more at stake than my license.
I contacted the title company and spoke directly with the lead attorney. We agreed that both spouses did not need to sign at closing. I contacted the home owners insurance company, which agreed to insure the property under the name of the owner(s) only, whomever they may be. I contacted the mortgage company, which like the Real Estate Agent, insisted that both parties were required to sign the closing documents. They offered two solutions: 1) hold off the purchase until after the divorce was final, or 2) the mortgage company would not qualify the loan.
I contacted the purchasing party and recommended that a more competent mortgage company be sought to finance the purchase. This was not an option as time-was-of-the-essence for two reasons: 1) they couldn't live with each other much longer, and 2) he feared losing this house as there was a back-up contract.
I contacted the mortgage company and asked to be referred to their attorney. They refused to make the introduction and insisted that both spouses sign at closing. I offered a series of qualifications to place before their attorney for review and approval: 1) that the purchasing party be independently qualified for the loan, 2) the non-purchasing party sign a waiver of homestead rights, and 3) we would provide written approval from all other parties, namely, the title company and home owners insurance company. I provided the Mortgage Company with the documents the non-purchasing spouse would be willing to sign, including: waiver of homestead rights; release of community property rights and equitable interest; a release of general warranty claims; and release of insurance claims and indemnity, on the subject property.
Several days later, after consulting with their attorneys, the mortgage company and underwriters agreed to accept a waiver of homestead rights signed by the non-purchasing spouse, prior to closing. Not only was the closing timely, it went smoothly, my clients separated peacefully, and the divorce settled with an Agreed Final Decree for Divorce.
As for the Real Estate Agent, he refused to attend the closing, still received his commission, and by request of the purchasing party, I did not report him to the Texas Real Estate Commission.
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