Proceeds Distribution Directives: Essential Considerations for Sale-of-House Court Orders in the Twin Cities, MN

When handling a real estate transaction tied to divorce or other family law matters, it's essential to ensure that proceeds distribution is clearly outlined in the court order. Without this, both parties and their legal teams can face a range of avoidable complications, from contract breaches to delayed closings. As a Certified Divorce Real Estate Expert (CDRE®) and Realtor®, I want to share some of the most common issues we encounter when court orders fail to address proceeds distribution.

Sale Sabotage and Stalled Transactions

One of the most frustrating and damaging consequences of not including proceeds directives in the court order is the complete breakdown of the sale process. When the parties involved are unsure of how or when they will receive the funds from the sale, the entire listing often stalls. As a Certified Divorce Real Estate Expert (CDRE®), it’s not uncommon to be "ghosted" by one or both parties — showings are canceled, inspections and appraisals are denied, and momentum grinds to a halt. This usually stems from fear and uncertainty about how the proceeds will be divided, leaving one or both parties unwilling to move forward. The absence of clarity can prevent individuals from securing new housing, which leads to a frustrating deadlock.

Misunderstanding of Proceeds and Contract Breach

In the midst of a divorce or family law proceeding, divorcing parties often overlook a crucial detail: the proceeds from the sale of their martial home might not be immediately accessible. In many cases, the funds are directed into an attorney's trust account or used to pay off joint debts, including support judgments. Both parties may be under the impression that the money will be available for their next purchase, only to discover that they cannot access it — potentially causing them to breach the purchase contract on a new home.

This misunderstanding can lead to severe consequences, including liability for failing to follow through on a contractual obligation. It’s essential for all parties involved to understand the timeline and conditions under which proceeds will be distributed to avoid this costly misstep.

Closing Delays and Escalating Costs

Once an offer is accepted and the title process begins, there are standard procedures to follow, including the creation of closing instructions. These instructions typically include a "proceeds disbursement" form. However, when there is confusion or a lack of clarity about where the funds should go, it can lead to significant delays — and delays in real estate transactions can be costly.

In most cases, the buyer(s) have already made arrangements for moving, contractors, and utilities. They may also be paying interest on a loan that has already been funded. Any delay due to unresolved proceeds distribution issues can cause frustration on the buyer’s side, potentially putting the seller in breach of contract.

Without clear directives, the closing process can be overlooked, leading to improper instructions being provided to the closing officer. This may result in issues such as funds being distributed to one party's account, bypassing legal obligations, and potentially causing further conflict.

The Role of a CDRE® in Preventing Proceeds Distribution Issues

One effective way to ensure proceeds distribution is handled correctly is by appointing a CDRE® as the listing agent. However, this role must be explicitly outlined in the court order, as a typical Realtor® does not have the responsibility to oversee proceeds distribution.

In my experience, I make it a point to review the court order and clarify the proceeds distribution on day one. If no agreement is in place, I have flagged the file for further review and work diligently to secure clarification from all parties and their counsel. Throughout the closing process, I maintain close communication with the closing officer to ensure there are no discrepancies between the court’s order and the instructions given.

Clear, actionable proceeds distribution directives in the court order are essential to avoid delays, contract breaches, and potential legal consequences. As a CDRE® and Realtor®, I work to ensure that these issues are addressed proactively to protect my clients' interests and smooth the closing process.

Shannon Lindstrom, Realtor®, CDRE®, CREDS, GREEN, MILRES, MRP, VCA
RE/MAX Results
7373 Kirkwood Court No, Ste. 300
Maple Grove, MN 55369
Direct: 612-616-9714
Lindstrom_S@msn.com
Shannon@ShannonLindstromRealtor.com
www.ShannonLindstromRealtor.com
www.ShannonLindstrom.info
https://www.ilumniinstitute.com/cdre/shannon-lindstrom
www.MNDivorceRealEstateExpert.com