Family Law attorneys adjusting divorce strategy for real estate market

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Divorce is often a tricky venture even in good economic times.

But one thing family law attorneys could usually bank on was that their client’s assets, especially real estate, would find a buyer in a relatively short amount of time. Once a sold sign adorned the property, the couple went their separate ways, and the lawyer got paid.

Times have changed.

Some family law attorneys in Wisconsin have adjusted their practices to compensate for the likelihood that many of their clients will be tied to homes that remain on the market indefinitely.

“It used to be we would wait until the house sold in about 90 days until we took our fee,” said attorney Thomas R. Glowacki of Hill, Glowacki, Jaeger & Hughes LLP, in Madison.

Glowacki said it was common for clients to wait to put a house up for sale, because there was minimal risk that it would drag out the divorce. But those days are long gone and a recent experience prompted Glowacki to raise his retainer.

“Now, we have no idea when that house will sell,” said Glowacki.

He said a client held onto the family home to the point where the owner lost the house and Glowacki only received 40 percent of his fee.

“Long story short, the house is in foreclosure and the client is in bankruptcy,” Glowacki said. “That was my wake-up call.”

Glowacki said his business has remained consistent during the economic downturn, but he would rather risk losing a handful of clients at the opening stage of a case due to higher up-front costs, than receive a small percentage of his fees after the work is done.

Even when a house sells, there is still a question of where that money will end up, said Milwaukee attorney Catherine A. La Fleur, especially since a client may have multiple debts.

While she primarily does guardian ad litem work, La Fleur also handles post-judgment divorce actions.

“The house is certainly subject to some division and in this market, the question is what happens in cases where there is not any equity left?” La Fleur said. “I think divorce lawyers have to be careful with how much money they put into a case.”

Milwaukee divorce attorney Gregg M. Herman recently had a client agree to a post-divorce business buyout, but the other side could not guarantee that the construction company in question would turn a profit in the future.

“When the deal didn’t look as good as anticipated, my client wanted to renegotiate,” said Herman, who added that neither side could afford to maintain a failing business.

Though he has not altered his billing strategy, Herman admitted that there is a greater risk of clients going through a divorce and not being able to cover all of their expenses.

“Divorce and financial prosperity rarely go together so people don’t have money to pay as their case goes forward so you may end up with a receivable,” said Herman.

Mediation is providing some relief for clients, but La Fleur suggested that it is sometimes hard to rationalize with a client who has no regard for cost.

She said a client in a recent referral was intent on litigating post-judgment issues, even though La Fleur questioned the logic.

“I asked if this is really the way you want to spend your money.” La Fleur said.

Glowacki said one thing his clients have not disputed is the current going rate for homes, even though in some cases the property sells for close to what the client paid initially.

But a lower market value has not made it any easier for one side to buy the other out, said Herman, because refinancing is more difficult.

“If you talked to me a year or two ago, in most cases it wasn’t a problem,” Herman said.

“I had clients who had been out of the workforce for several years who were getting loans.”

Now a divorcee who wants to buy out half of the $100,000 equity in a home may not be able to get a loan to do so, which means the only other alternative is to put it up for sale in a depressed market.

“People are still getting divorced, but it’s become a slow motion process,” Glowacki said.