Our firm recently became involved with a divorce case that had already been going on for 6 months, with a disputed property preventing the husband and wife from moving forward. After being appointed as a Maricopa County Real Estate Special Commissioner, we were able to value, rehab, manage and sell the property within 45 days. The case could have stayed in the courts for years without a neutral third party.
A Real Estate Special Commissioner or other neutral third party can be highly effective in a wide array of cases, including divorce, receivership, probate, and bankruptcy. As in the above example, the common element is the use of a court order or court-supervised proceeding in order to sell a property or arrive at an alternative settlement.
Real Estate Special Commissioners and Other Court-Ordered Appointments
When disposing of assets, the court appointee needs to be responsive to the court’s expectations and requirements as well as the parties’ goals. For determining a valuation, commercial real estate assets require a broker opinion of value (BOV) or an appraisal; residential properties will typically use a broker price opinion (BPO) or appraisal. The property type and metrics are incorporated into a marketing strategy, with the goal of securing high-probability buyers (e.g., investors, owner-occupants or specialized buyers) and the best possible pricing terms.
Buyer selection, contract negotiations and documentation are designed to limit the liability of the parties involved in the underlying litigation. Disputed property sales are typically on an as is/where is basis, without representation and warranties, and they may be subject to court approval/oversight, depending upon the forum.
Different case types incorporate different types of experts, and a real estate broker may play a role in each:
- Divorce: In divorce cases, a Real Estate Special Commissioner is typically a licensed real estate broker appointed by the court to initiate and complete the sale of real property. A standard order requires the party in possession to contact the Special Real Estate Commissioner within 10 days, and then the valuation, marketing and disposition process is initiated. Access, showing times, reporting intervals, short sales/foreclosures and other provisions can be addressed by special orders. Although the court retains jurisdiction, the Real Estate Special Commissioner generally has authority to proceed with a sale in divorce cases, without court approval.
- Receivership: Receivership specialists are generally appointed in cases of monetary or other default in loan documents and/or a dispute among principals, although we are also seeing an uptick in their use for divorce cases with business operations and in “business divorce” cases. After intake and assessment of the assets and liabilities of the receivership estate, the receivership specialist develops a stabilization, turnaround and/or disposition strategy, along with formal reporting. Ideally, real estate assets should be sold while a receivership action is pending, in order to create the most pre-market awareness and negotiation leverage–and to limit the lender’s liability.
- Bankruptcy: In most bankruptcy cases with real estate assets, the bankruptcy trustee or the debtor-in-possession (DIP) will hire a real estate broker to market and sell the real estate assets to pay the secured creditors in full and make a distribution to unsecured creditors.
- Probate and Fiduciary Matters: Conservators, guardians, personal representatives or trustees with fiduciary responsibilities serve in a role of trust, and manage the affairs of the individual solely for his/her benefit. The role of a real estate broker can include steps such as valuation, marketing and sales of applicable real estate assets, and may be expanded to asset intake, inventorying, maintenance, management and repairs in some cases.
Higher/better bidders may be present in probate and bankruptcy matters; when that is the situation, they are encouraged to bid at the court hearing where the trustee or fiduciary is seeking court approval of the sale. As a final step, any court-appointed agent and/or trustee must be prepared for the inquiry of the judge regarding the valuation, marketing, management and contract negotiation process.
Settlement vs. Sale
Court-appointed resolutions may also include options beyond selling the disputed property. A receivership specialist, for example, can level the playing field when one party controls the finances or business interests in divorce or business divorce. To accomplish that, a Receiver can perform asset intake and put systems in place to build an accounting system. Other tasks may include tracking financial activity in operating businesses and/or real estate-centric businesses such as hotels, mini-storage businesses, apartments, shopping centers, gas stations or any other real property-centric business. With all parties having access to the same information, it’s far easier to get spouses or business partners to agree to engage in settlement negotiations regarding the allocation of assets and liabilities.
Beth Jo Zeitzer is the President and Designated Broker of R.O.I. Properties. R.O.I. Properties is a full service real estate brokerage and consulting firm focused on the enhancement of real estate assets. R.O.I. serves sellers, buyers, investors, attorneys, trustees, lenders, asset managers, turnaround professionals, and fiduciaries in the acquisition, lease and disposition of commercial and residential real estate. Services include Brokerage, Receivership, Special Commissioner/Special Master Appointments, Management, Valuation and Expert Witness consulting and testimony, for retail, office, industrial, apartments, hotels, land, mini-storage and single-family assets.