Alternatives to Real Estate Special Commissioners

A Real Estate Special Commissioner (RESC) can be extremely effective in many divorce cases and may be the right solution when the parties cannot cooperate in the sale of the marital residence. However, there are situations where an alternative—or an additional layer of dispute resolution—may provide a better solution.

Why Consider an Alternative?

There are several practical reasons to consider alternatives to appointing a Real Estate Special Commissioner.

First, it can be difficult to find a qualified Real Estate Special Commissioner. This is a specialized role requiring more than simply being an experienced real estate agent. The agent needs to understand the divorce process, court orders, the limitations of the RESC's authority, documentation requirements, high-conflict situations, and when an issue must be returned to the Court.

Second, sometimes the parties already have a real estate agent they know, trust, and want to use. That agent may be an excellent Realtor but may not be qualified or trained to serve as a Real Estate Special Commissioner. Appointing an otherwise capable real estate agent as an RESC without the appropriate training can potentially create more problems than it solves.

There is nothing wrong with allowing the parties to use their preferred real estate professional while creating a separate mechanism for resolving disputes.

The Biggest Practical Problem: Getting a Timely Hearing

One of the biggest challenges qualified Real Estate Special Commissioners face is not necessarily selling the property. It is obtaining timely access to the Court when a dispute arises.

Real estate transactions operate on extremely short deadlines. Buyers do not necessarily have the ability—or the willingness—to wait while the parties seek a hearing.

A dispute may arise regarding an offer, repairs, inspection requests, access to the property, a closing issue, an extension, or another time-sensitive decision. The RESC may request a hearing, but obtaining court time quickly enough to preserve the transaction can be difficult.

Meanwhile, there may be a buyer waiting for an answer.

That creates a significant practical question:

How do we resolve real estate disputes quickly enough to keep the transaction moving while still protecting both parties and maintaining appropriate oversight?

There are several possible solutions.

Alternative #1: Involve the Attorneys Before Requesting a Hearing

If a Real Estate Special Commissioner has already been appointed and a dispute arises that cannot be resolved, one option is to bring the attorneys into the discussion before proceeding to a hearing.

Historically, I have tried not to involve attorneys unnecessarily because I am sensitive to the additional expense to the parties. However, my thinking on this has evolved.

If the dispute is headed toward a hearing anyway, the attorneys will likely become involved. Giving counsel an opportunity to resolve the issue before the hearing may save everyone time and money—and, most importantly, may allow us to preserve a buyer and keep the transaction moving.

The attorneys may be able to help their clients understand the issue, evaluate the financial consequences, negotiate a compromise, or reach an agreement that eliminates the need for a hearing altogether.

For time-sensitive real estate matters, that additional level of problem-solving can be extremely valuable.

Alternative #2: Mediation and Arbitration

Another possibility is to build a private dispute-resolution process into the parties' agreement.

If the parties already have a mediator, they may wish to explore whether that professional—or another mutually selected neutral—can serve in an arbitration or other agreed decision-making role for specified real estate disputes, subject to applicable Arizona law and the parties' agreement.

The primary advantage is speed and accessibility.

A private neutral may be easier to reach and may be able to schedule a meeting much more quickly than the parties can obtain court time.

There is, of course, an additional cost. Some clients may initially resist paying another professional. However, that expense should be compared with the cost of preparing for and attending a court hearing—or, even more importantly, the financial consequences of losing a qualified buyer because the parties could not make a decision within the contractual deadline.

In some cases, paying for expedited private dispute resolution may ultimately be the less expensive alternative.

Alternative #3: A Family Law Master Under Rule 72

Another option is a Family Law Master under Rule 72 of the Arizona Rules of Family Law Procedure.

A Family Law Master can be particularly useful when the parties anticipate that disputes may arise during the sale and need a mechanism for resolving those disputes more quickly.

Under Rule 72, the parties may agree to the appointment of a Family Law Master, subject to court approval. The court's order of reference identifies the particular issues assigned to the master and establishes the scope of the master's authority. Rule 72 permits a master, subject to the limitations of the rule and the order of reference, to address referred issues under Title 25 that could otherwise be presented to the assigned judge.

In practical terms, this can provide something similar to a private judicial process for the particular issues referred to the master, while remaining within the framework established by the Court.

This can be extremely valuable in a real estate transaction.

As anyone who handles real estate knows, problems seem to have an uncanny ability to arise at 4:30 p.m. on the Friday before a three-day weekend.

When that happens, waiting days or weeks for a hearing may jeopardize the transaction. Depending upon the professional's availability and the scope of the appointment, a Family Law Master may provide a much faster mechanism for addressing the dispute.

There is an additional cost, so the parties may want to consider establishing a retainer for the Family Law Master at the beginning of the process, with any unused funds handled according to the professional's engagement agreement and the court's orders.

The important point is to create the dispute-resolution mechanism before the emergency occurs.

The Goal: Keep the Real Estate Transaction Moving

The purpose of these alternatives is not to eliminate the Real Estate Special Commissioner.

In many cases, an experienced and properly trained RESC remains an excellent choice.

The goal is to recognize the practical realities of real estate.

A buyer is not a party to the divorce. A buyer may not understand why two sellers cannot make a decision. More importantly, the buyer may not be willing to wait for the parties to resolve their dispute.

When drafting Rule 69 agreements, decrees, or other orders involving the sale of real property, attorneys should consider not only who will list and sell the property, but also:

What happens when the parties disagree, who has authority to resolve the disagreement, and how quickly can that decision be made?

Answering those questions in advance can prevent a relatively small disagreement from jeopardizing an otherwise successful transaction.

Specialized Arizona Real Estate Training

Another challenge for attorneys is determining whether a real estate professional actually has the specialized training necessary to work effectively in a divorce-related transaction.

To help address that issue, I have developed Arizona-specific real estate training and designations.

REDS-AZ — Real Estate Divorce Specialist – Arizona

The REDS-AZ designation stands for Real Estate Divorce Specialist – Arizona.

I specifically identify the designation as Arizona-based because divorce procedures, court rules, real estate practices, and legal processes vary significantly from state to state.

There are divorce real estate training programs originating in other states. My program is specifically focused on Arizona divorce and Arizona real estate transactions, drawing upon more than a decade of my experience working with divorcing couples, attorneys, mediators, and the Arizona court system.

REDS-AZ agents are trained to understand how divorce can affect the real estate transaction. This includes recognizing that the sale may be governed by a Rule 69 agreement, divorce decree, or other court orders containing requirements concerning the property, listing, sale, deadlines, possession, expenses, proceeds, reimbursements, offsets, or distribution of equity.

These agents also receive ongoing mentoring and assistance from me as they work through these specialized transactions.

RESC Training — Real Estate Special Commissioner

My Real Estate Special Commissioner training goes substantially further because serving as a court-appointed professional requires an entirely different level of knowledge.

The training addresses how to function within the court process, understand and operate within the appointment order, document activity, communicate appropriately with high-conflict parties, recognize the limitations of the RESC's authority, request hearings when necessary, prepare information and exhibits for the Court, and testify regarding real estate issues when required.

Agents completing this training are not simply learning how to list a divorcing couple's home. They are learning how to operate appropriately when the real estate transaction intersects directly with the judicial process.

I also mentor these agents as they gain practical experience handling court-involved transactions.

Additional CLE Programs and Attorney Education

I also offer educational presentations for attorneys regarding divorce and real estate. These programs may qualify for CLE credit when the applicable requirements are met, including having at least five attorneys participate.

Presentations can be provided as office lunch-and-learns, group programs, webinars, or other educational formats.

Topics can include:

Drafting effective Rule 69 agreements and divorce decrees involving the marital residence;
Determining when a Real Estate Special Commissioner may be appropriate;
Alternatives to using a Real Estate Special Commissioner;
Understanding the role and limitations of the RESC;
Addressing situations where one spouse wants to retain the residence;
Creating realistic procedures and deadlines for listing and selling the property;
Handling disagreements regarding pricing, offers, repairs, inspections, and closing;
Addressing reimbursements and offsets;
Providing clear instructions for the distribution of equity at closing; and
Avoiding provisions that create unnecessary problems for the parties, the real estate professionals, escrow, or title company.

I am also available to speak with attorneys who have general questions regarding the real estate side of divorce matters.

My goal is to provide practical information that helps attorneys anticipate real estate issues before they become emergencies and to create processes that allow the parties, attorneys, real estate professionals, and Court to move the property toward a successful closing.

The best time to determine how a real estate dispute will be resolved is before the dispute occurs.