Minneapolis/St. Paul Divorce Real Estate: Bookkeeping Pitfalls at the Closing Table
In many divorce situations, selling the marital home can be a valuable opportunity to pay off joint debts and move forward financially. While it may seem practical to instruct the title company to distribute proceeds directly to various creditors—such as attorneys, credit card companies, or even for child-related expenses—this approach often leads to unexpected complications and, in many cases, is not permitted by the title company.
Title companies frequently receive requests to disburse funds from closing proceeds to multiple third parties, including:
Outstanding child or spousal support
Credit card balances or auto loans
Legal fees or private school tuition
Costs for court-appointed experts
However, these types of disbursements may fall outside the scope of what a title company is authorized or willing to handle. To avoid delays and disputes at closing, it's critical for divorcing parties—and their attorneys—to understand these limitations and plan accordingly.
While these intentions are understandable, three key issues make this approach problematic.
Issue #1: Ambiguous or Insufficient Court Order Language
Title companies require crystal-clear, unambiguous instructions. Unfortunately, many court orders don’t provide the specificity needed. Consider the following examples:
· Petitioner shall reimburse Respondent for 50% of the cost of the minor child’s summer camp.
· Respondent shall reimburse Petitioner for their portion of the mortgage payment from May 2022.
· Respondent shall receive reimbursement for repairs made and 50% of the balance of an insurance payout.
While these instructions convey general intent, they often lack specific dollar amounts. Without clear, itemized figures, title companies are unable to accurately or effectively disburse the funds.
Compare that to clear, actionable instructions that allow title to proceed with confidence:
· Proceeds shall be divided 50/50
· From Joe Smith’s 50% share, deduct and pay Jane Smith:
o $1,192.65 for summer camp reimbursement
o $2,678.23 for restoration repair reimbursement
o $5,821.77 for 50% of insurance proceeds
· From Jane Smith’s 50% share, deduct and pay Joe Smith:
o $43,960.64 for mortgage payments since May 2022
This kind of specificity is essential to avoid delays, disputes, etc.
Issue #2: Proceeds Disbursement Must Be Related to the Sale
Title companies are typically limited to paying expenses directly tied to the real estate transaction. These may include:
· Repair contractors (for negotiated sale-related work)
· Outstanding HOA dues
· Property taxes or municipal liens
Requests to pay off unrelated debts—such as car loans, attorney’s fees, or personal reimbursements—are generally not permitted. Not only are they outside the scope of title closer’s duties, but they also introduce liability concerns for the closing company.
Best Practices for Divorce-Related Home Sales
To ensure a smooth closing in the context of a divorce, consider the following best practices:
· Use exact figures: Court orders must spell out dollar amounts to the penny.
· Limit disbursements: Only authorize payments directly related to the home sale.
· Clarify distribution: Clearly indicate who receives what, and where funds should be sent.
If you have questions or need guidance regarding divorce-related home sales in the Twin Cities area, don’t hesitate to reach out.
Please feel free to contract Shannon Lindstrom, Certified Divorce Real Estate Expert and Realtor® at RE/MAX Results today to begin your journey with the guidance and expertise that will help you make empowered decisions during this time.
Shannon Lindstrom, Realtor®, CDRE®, CREDS, GREEN, MILRES, MRP, VCA
RE/MAX Results
Direct: 612-616-9714
Lindstrom_S@msn.com
Shannon@ShannonLindstromRealtor.com
www.ShannonLindstromRealtor.com
www.ShannonLindstrom.info
https://www.ilumniinstitute.com/cdre/shannon-lindstrom
