By Riki Markowitz
There’s a pretty lucrative niche real estate category that in some markets seems to be hiding in plain sight. Many agents in this field say that getting just one listing for a couple in the process of terminating their marriage can lead to more word-of-mouth referrals. And after a divorce finalizes and the sale closes, there’s also the possibility that one or both partners may retain your services to purchase a new home.
On paper, it sounds like a win-win situation all around. But in a saying popularized by the social media generation, it’s complicated.
Justine Smith, a broker/owner at Moxie Realty Group, says that working with a couple that is not on speaking terms can have a negative effect on everyone. “It can be very adversarial and it’s definitely stressful,” says Smith, who is a certified divorce real estate specialist (CDRES). “Sometimes they even try to use you as a pawn.” She adds, somewhat tongue-in-cheek, “I think every agent should have a degree in counseling.” Many certified divorce specialists in the real estate field suggest getting some training in mediation.
In the U.S., 1.2 million couples get divorced every year, according to Carol Ann Wilson, a certified financial divorce practitioner who has been working in this category for more than two decades. Of these divorce cases, more than 70 percent involve either selling a home, buying a home or both. Each year, an entirely new group of one-million-plus couples starts the process anew. So there’s always a demand for agents experienced in this field.
Before you jump in feet first, like every real estate category, there is a lot of information that divorcing clients need to know and it is the agent’s job to explain it, such as relevant capital tax gains laws and exclusion rules, rights and deadlines. Clients also need to know the advantages of selling their home and filing a joint tax return while still technically married, versus a post-divorce sale and filing individual tax returns. If they want to sell before the divorce is finalized, there’s not a lot of time to waste on arguments and settling scores.
In these transactions, there’s often a third or fourth party that can help you inch your clients toward closing. Each partner’s divorce attorney can step in when heated emotions are interfering with your job.
Christy Gessler, broker/owner at Freedom 512 Real Estate Group, said she was working on selling a home in rural Burnet County. “The husband and wife could never agree on a sale price,” she says. “They always wanted to sell much higher, even if it wasn’t reasonable.” When you have angry – maybe even vindictive – ex-spouses for clients, the agent is almost like a proxy for one partner. While Gessler presented her clients with an unbiased, fair-market estimate of the home’s worth, it was still scrutinized suspiciously. In this situation, one of the attorneys called Gessler and was livid that the transaction was taking so long. She had to explain that the clients were going against her advice. Later, she was asked to testify as an expert witness in the couple’s divorce case. Ultimately, the judge set the sale price. Reflecting back on it now, Gessler believes that one of the partners was intentionally undercutting her efforts (to get back at the ex).
Once the divorcing clients close on a house that they own together, they split the equity. In some proceedings, a judge might determine a specific dollar amount that partners are entitled to once the sale is final. Smith doesn’t think this is the best way to split equity from a home sale. Say, for example, in June 2018 a house is appraised at $500k and the judge rules that the husband gets $250k. In 2020, the couple finally gets around to selling the house, which means the property likely gained or lost some value. Based on the judge’s decree, whether the home sells for $750k or $425k, the husband is still entitled to $250k. In other words, by awarding one side with a dollar amount versus a percentage, the judge has inadvertently set everyone up for a whole new set of problems and delays.
Gessler and Smith both say that their relationship with divorce attorneys have always been very amicable. Gessler surmises that when friction does occur, it’s due to a client putting pressure on the attorney, who then turns around and puts it right back on the agent. “That’s why you can’t take this particular job personally,” says Gessler. “If you can’t keep your personal feelings out of it and if you’re easily rattled or take offense, this is not a job for you.”
Something else agents have to consider before working in this market is the constant fighting, painful stories and accusations. There’s a mantra Gessler relies on to get through certain days: “Stay in my lane.” You’re here to sell a house, nothing more. The feeling you can get from working on these transactions is nothing like the joy you feel when you match a client with the perfect home.
Smith says that her strategy for working with divorcing couples is, first, never take work home, and second, work with a partner who can jump in. For example, Michell Kneeland, an accredited buyer representative (ABR) and Smith’s partner at Moxie, can work with one spouse while Smith works with the other. Lots of divorcing clients respond better when they have separate agents (from the same agency).
So now that you’re ready to start signing listings in this category, how do you establish yourself? Early in Smith’s career working with divorcing sellers, a divorce attorney friend told her that it would be easier for her to get referrals if she had a relevant degree or specialization. Well, it turns out that there’s a certification for this. One program, cofounded by Carol Ann Wilson, an expert on marital financial issues and pre-divorce financial planning, is called the Real Estate Divorce Specialist. The curriculum, and others like it, teaches students the legalities, tax laws and issues relevant to sellers who are terminating their marriage. Agents learn how to protect themselves from malpractice and what it means when asked to be an expert witness at a divorce trial. You’re also introduced to an entire industry of professionals certified in different areas of “divorce management,” like divorce planners, financial planners and mediators. The best advice an agent can take before working with divorcing clients is to insulate yourself to the best of your ability. And stay in your lane. RL