This is a friendly reminder to include proceeds division and distribution directives in sale-of-house orders! It will save you a headache! Just read below for the numerous complications that can arise from missing this step.
In addition to enforceability and protecting your clients' interest, here are a few of the issues we see when there are no orders or agreement regarding proceeds:
Without an order or agreement, the closing process can evade busy counsel, and without a close eye on these timelines, the parties may instruct the closing officer to distribute funds directly to their accounts, bypassing attorney trust accounts or other joint debts being paid.
Perhaps the most alarming scenario is when only one party is on title. The titled party is the principal in the real estate transaction. Title officers and brokers can be bound by fiduciary duties and real estate industry governance to obey the principal and distribute funds pursuant to their instructions (aka, their own bank account). They may slice out the other party altogether — even with a court order to the contrary! The only way you avoid this is with direct instruction as to sales proceeds.
It's also worth noting that title frequently cannot (or will not) hold funds after closing without legal orders in place to direct this activity. They are governed by Texas Department of Insurance and the oversight is significant when funds are held for any length of time, there must be court direction.
Appointing a CDRE as the listing agent on a case is an effective way to ensure orders match distribution instructions, but that duty must be outlined clearly in an order, since a typical Realtor's role does not extend that far.
When I am appointed on a case, for example, I obtain a copy of the court order and inquire about proceeds distribution on day one. If there is no agreement, I flag my file to seek clarification from the parties and counsel until there is one. I work closely with my closing officer to ensure there are no discrepancies between the order and the instructions; after all, rolling back improperly distributed funds can be akin to unringing a bell.
Reach out to us if you have case specific questions, we would be happy to help.
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