Get a Home Offer from a
Qualified Local Buyer

Request an Offer
Call 800.383.1459
 
5 Issues for Executors When Selling a House in Probate

5 Issues for Executors When Selling a House in Probate

5 Issues for Executors When Selling a House in Probate

When planning your estate and preparing for your death, you’re required to lay out a comprehensive last testament and consequently name an Executor for it. This is the individual who will represent you in the execution of your last wishes after you’ve passed away—hence the need to pick out a person whose character, dependability and integrity are in agreement with your needs and values. That notwithstanding, Executors face a number of challenges and we’ll be looking at the top 5 issues for Executors when selling a house in probate, but first...

Why would you sell a house in probate?

Probate is often applicable in most cases where the deceased left a will which cannot be executed by the Executor until after legal confirmation by the probate courts. Therefore the administration of the deceased’s estate is not valid without the due process of probate following suit.

There are some instances where probate may be notwithstanding in the division of assets, such as is the case with non-probate property, and this has been exhausted in the article on Probate and Non-Probate property.

So for the cases where probate applies, why would you sell a house in probate? Here are 7 key reasons for selling real estate in probate:

1.     To settle liabilities

Sometimes the deceased leaves behind a number of liabilities in terms of debts, taxes (state or federal), and claims from creditors whose payment may not be realized without liquidating some assets from the deceased’s estate.

In such cases, the most prized assets, such as real estate, prestigious vehicles, a boat, etc, come in very handy in settling the liabilities through liquidation.

2.     Monetary preferences of the heirs

The last will may have a number of heirs and beneficiaries named to inherit the deceased’s real estate properties, but the heirs may not be interested in taking up the property as is.

Many heirs prefer having the inherited real estate turned into an equivalent monetary value that they can then make more use of.

3.     “No Share – Don’t Dare”

The last testament may have a provision for the deceased’s real property to go under joint custody or shared ownership amongst two or more heirs.

However, inheritance is famed as the farm whose seeds seldom grow together—and some heirs would rather have a probate house sold at an undervalued price, than share the property with an estranged fellow heir.

Selling the house in probate naturally falls in place as a solution, even if only for the sake of peace and sanity—especially the Executor’s!

4.     Cumbersome management of the inherited property

Managing real estate, and an inherited one at that, may not be as rosy as it is cut out to be... There are additional responsibilities and burdens attached to the property and they include:

·       possible repairs and renovation costs

·       pending or continuous mortgage payments

·       associated property taxes according to the state laws

It is for reasons such as these that managing inherited property may become cumbersome and burdensome, especially in terms of financing and time.

5.     The tragedy of loss

Let’s face it, not many would be happy-go-lucky to move into a house whose owner just passed away and left their belongings scattered all around the house—especially if this person died in that house...

Some people wouldn’t mind it or just don’t care altogether—but you can’t blame yourself if you’re not one of them! There are enough urban legends, superstitions and mysterious occurrences that may have worked their way on you…

Now, what if the deceased was close to you...a relative, a loved one, and one whose house was left to you? It’s hard enough accepting your loss and coming to terms with the fact that they’re gone forever—so, what of living in their house? Figures!

6.     To minimize risks and losses

As previously mentioned, a probate house could result to being more of a liability than an asset at the time being due to additional expenses in the name of management costs. As an Executor, it’s up to you to establish whether or not this is the case with the deceased’s property.

While real estate generally gains value over time, the scope of selling a probate house may not be projected that far ahead.

If the real property seems to be:

·       costing more and more in maintenance and repair costs,

·       losing value in relation to the current realty market trends and valuation, and

·       carrying more risks or complications than if liquidated –

- then it makes sense for the Executor to propose selling it other than keeping it around as risk-factor to the value of the estate.

7.     As a testamentary requirement

In some instances, selling the deceased’s real estate property may be a requirement of the deceased’s last testament. This basically means that there was a provision in the will for the probate house to be sold.

The deceased reasons in so choosing could be:

·       So that the returns can be shared amongst several beneficiaries

·       For the funds to be incorporated into a trust with specified survivorship

·       For charity or any other philanthropic intentions

For whatever reasons a house in probate goes up for sale, the Executor is responsible to see to it that the deceased’s wishes are enacted fairly while honoring the probate laws.

Who is entitled to be an Executor?

So, just who can be named as an Executor? Many people assume that an Executor has to have some legal background, a lawyer perhaps... But that is far from the truth since it is neither a necessity nor a rule-out.

 

 

Pretty much anybody can be named as the Executor of an individual’s will so long as they meet the following criteria:

a)     Legal Requirements

·       A legal adult according to the state law of that particular jurisdiction

·       One with a clean bill of conduct, no criminal record

There may be some additional legal requirements that entirely depend on the state laws governing your jurisdiction.

If you’re named as an Executor acting in a state other than yours, you should first check in with the laws of the other state. Certain states have specific legal requirements for Executors hailing from other states, a case in which you might be required to find a representative local to that foreign state.

b)     Ideal Requirements

For the sake of the deceased and their last wishes, the ideal requirements for an Executor are:

·       A competent  and reliable person

·       Someone the deceased trusted and depended on

·       One who’s willing to dedicate their time, energy and effort to oversee the actualization of the deceased’s last wishes

·       A person that’s close to the family or has a close understanding of the deceased’s family

·       One who had a personal relationship with the deceased before death

·       An individual with good values, moral fiber and a heart — integrity, compassion, considerate, not materialistic, wise, decisive and responsible

It could also help to have a Co-Executor since not many individuals could come wholly packaged with all their tricks in one bag at that point in time. When things get out of hand, or as a precautionary measure, the Co-Executor could always step in to give a helping hand and complement the Executor.

What if the named Executor cannot serve?

Families may find themselves having to deal with a situation where the named Executor is not in a position to serve, and these are common reasons:

·       The named Executor is disinterested or simply chooses not to serve

·       The named Executor cannot afford the time and commitment required to serve

·       The named Executor predeceases (dies before) the deceased

·       The named Executor is ineligible according to the state laws of the deceased’s jurisdiction

·       The beneficiaries are dissatisfied with the named Executor, and both parties agree to a replacement (NOTE: The beneficiaries cannot seek for a replacement of the pre-named Executor, however they wish to, unless and only if the Executor so agrees to give up the role)

·       The probate court may also find fault with the Executor in their execution of duties  – unethical practice (such as being irresponsible) or gross misconduct – all of which may prompt the probate court to take stringent measures such as pegging financial liability on the Executor, or in some very rare cases, replacing the Executor altogether

“Testate, Non-executable”… This can be a rather confusing situation especially where a Co-Executor had not been named, while the family is caught unawares and in the middle of probate. In such instances, it may prove worthwhile to get legal counsel from a family lawyer or any other attorney specialized in probate.

The probate courts may also convene by approving an application for the Executor’s replacement, at which point the incoming Executor will be referred to as the “Estate Trustee”, “Estate Administrator” or “Personal Representative”.

What is the role of an Executor?

Having already identified the Executor as the pre-named individual in a deceased’s last will, we’ll take two directions in establishing the duties and responsibilities of the Executor.

      I.         General role of an Executor

The work of an Executor is much like juggling frogs and the following responsibilities tell it all:

·       Informing all relevant persons and companies of the deceased’s demise (these include: utility providers, insurance companies, businesses and organizations the deceased was affiliated to, financial institutions with which the deceased had an account – banks, credit companies, government institutions – IRS, SS, etc)

·       Taking inventory of all the deceased’s finances, assets and possessions, as well as getting current and valid appraisals for any valuables  such as jewelry, real estate, art collections or any other collectibles

·       Establishing whether the administration of the deceased’s estate will go probate or not, and if so, file the necessary documentation and take the necessary steps to initiate probate with the courts

·       Identifying any non-probate property (trust funds, Transfer-on-Death (TOD) holdings, Payable-On-Death (POD) accounts, etc) and the implications with regards to the last will

·       Informing all mentioned heirs and beneficiaries of the deceased’s estate that they’ve been

·       Looking after the deceased’s entire estate: securing any property (especially if vacant), safely stowing any valuables, maintaining all possessions in good if not better condition, recovering all of the deceased’s belongings in other people’s possessions

·       Consulting and liaising with the heirs and beneficiaries on any important issues, crucial decision-making, charting the way forward, getting them on the same page with you and the requirements of the will

·       Debt collecting: The Executor is responsible for collecting any and all debt owed to the deceased and this includes any pending payments to the deceased, the last salary, benefits from the deceased’s insurance policy, and any other forms of money owed to the deceased’s estate

·       Credit paying: The Executor is also expected to settle credit owed by the estate to any claimants on behalf of the deceased but not on the Executor’s account but from the estate finances; these include: utility bills, credit card payments, loans, etc.

·       It is also the duty of the Executor to file any tax returns back to the state on behalf of the deceased, including any fees to both the state and/or any other federal agencies the deceased is indebted to

·       Once the Executor has successfully settled all of the estate’s money-in and money-out, the distribution of assets can begin, and depending on what’s left of the estate and with regard to the last testament, the heirs and beneficiaries can then receive their due inheritance

     II.         Role of an Executor when selling a house in probate

If the Executor comes to an agreement with the beneficiaries or makes the executive decision to sell the probate house for any of the previously mentioned reasons, their role in selling real estate during probate then follows:

·       Obtaining an accurate valuation of the probate house from an independent party such as a state Appraiser

·       Filing the petition to sell the probate house with the courts

·       Upon confirmation from the probate court, the Executor may either be granted full or limited authority to carry out the transaction (this according to the IAEA – Independent Administration of Estates Act)

·       Compiling all the necessary documentation (contracts and disclosures) that will be used in the transaction

·       Finding a reliable real estate agent who will conduct the sale on behalf of the estate

·       Agreeing on the terms and conditions for the transaction with the acquired buyer

·       Consulting back and forth with the heirs and beneficiaries, getting their input and providing input with regards to the deceased’s

·       Reporting back to court (where necessary) to finalize the sale with the court’s approval

·       Presenting all document transfers to the buyer of the probate house

·       Channeling the funds acquired from selling  the probate house back to the deceased’s estate

When it comes to undertaking the deceased’s will, there’s no doubt that the Executor may have to break the back of the beast, and selling a house in probate is no mean feat either!

What are the top 5 issues for Executors when selling a house in probate?

Estate Executors have enough on their plate in more than just way...just as the task is daunting, so are they bound to face a number of challenges which are discussed below under:

1)     Large Estate

2)     Additional Expenses

3)     Dissatisfaction of Heirs/Beneficiaries

4)     Finding a Buyer – Getting a Good Price

5)     Time Taken to Sell the House in Probate

Brace yourself for these top five challenges if you’ve just been named as an Executor, are interested in taking up the role of an Executor.

Challenge #1 – Large Probate Estate

Consider the size of the deceased’s estate directly proportional to the challenges of the Executor – the larger the probate estate, the harder the Executor’s work.

For probate estates valued in the millions, you’ll be kidding yourself to think that you can handle it all on your own. You will definitely need some expert help in auditing and valuation, because such big estates are predisposed to taxes on both the state and federal level.

As an Executor, you’re mandated to oversee the settlement of all the estate’s liabilities and taxes should be top on that list. This is a sensitive and serious aspect that should be treated with as much gravity for larger estates attract more liabilities.

Executor’s Tip for Issue #2

o   Get a professional auditor to help you out or complement your role as a Co-Executor

o   Before you take up the executive role, find out what the magnitude of the deceased’s estate really is

Challenge #2 – Additional Expenses

One of the greatest fears that many Executors confess to is that of financial liability (fiduciary responsibility)...  

Countless expenses are incurred when selling a house in probate. As if that’s not enough, the entire probate process is expensive enough, leaving more and more people strongly considering any other alternatives just so they can avert probate.

In reality, Executors are not expected to dip into their pockets per se (unless if voluntarily)... But it is their responsibility to ensure tip-top management of the deceased’s estate; and with an expectant survivorship looking up to the Executor for their inheritance, any additional expenses funded from the estate are a burden enough.

There are numerous costs involved when selling a probate house, and the following are top on the list:

·       Paying the Lawyer

Chances are that the Executor will most likely need some crucial legal counsel in more than one area of the estate’s administration. Keep in mind that a legal background is not in itself a compulsory requirement for the Executor.

      i.         If the deceased’s real property is very large and complex, certain federal and state laws will require some revenue (taxation) from the property and you will need a lawyer

     ii.         If the probate house was jointly owned by the deceased and one or more parties, and especially if the other co-owners do not agree to the sale of the probate real estate, then legal advice is paramount

   iii.         If a beneficiary or any other party contests the will in court, you won’t be able to sell the probate house until everything is settled, a situation that will call for an attorney to represent the deceased’s estate

    iv.         If the deceased had previously entered into contracts that are legally binding on the real estate (such as complex trust funds and any other non-probate contracts), then an attorney should be on your dial

Be sure to first discuss with the lawyer what their terms are, how you will be billed (the billing schedule if any), and map out what their services will roughly cost you over a certain period or for certain legal assistance.

Most of all, be sure not to spend so much on a quack lawyer when you can spend a relative amount on a qualified attorney who will actually get the job done!

·       Paying for Documentation

Executors find themselves having to deal with a bucket-load of paperwork here and there – and these are not just documents you pick from the deceased’s desk, most of them will be obtained from the courts, state offices and federal agencies...at a fee!

For instance, the deceased’s house cannot be sold without an official Death Certificate, and though a small price to pay, it’s not the only document the Executor will be collecting—more like the first of hundreds others...

·       Paying for Overhead Costs

Very rarely is a house in probate some newly built, never-lived-in, low-maintenance house... Often a time, the inverse actually applies and this typically shouts for more and more overhead costs.

Houses in probate generally incur expensive—sometimes even unmanageable—costs in repairs, maintenance, state taxation, mortgage funding, insurance payments, appraisal/valuation fees, among other progressive expenses.

·       Paying the Dealers

The actual sale of the house in probate will most likely transpire through a real estate agent or a similar party such as a real estate auction.

The dealers of the probate house will have to “take their cut” either as a percentage of the list/selling price, or as an agreed fixed amount—either way, a remarkable yet unavoidable expense!

·       Paying the Probate Courts

Perhaps this may not make up for the bulk of expenses incurred when selling a house during probate, but they make up for something alright!

Fees paid to the probate courts can be as little as a few bucks ($10-20) to as much as a percentage of the deceased’s estate. At the probate courts, the Executor is expected to pay for hearings, petitions, new applications, certification, among other forms of documentation.

Probate court fees can be generally grouped into:

      i.         Service provision fees

      ii.         Case processing fees       

     iii.         Legal copy fees

Whether or not the Executor will pay certain fees for documents, services or case processing will also depend on specified factors or circumstances. All in all, he/she should be aware of what’s payable and how much it’s going to cost depending on the state laws governing the particular jurisdiction.

Executor’s Tip for Issue #2

o   Always find out upfront what—if anything—it will cost you

o   Remember that you’re accountable for any and all expenditure on the account of the estate, avoid spending what you shouldn’t or can evade

o   Keep updated records and accounts of all your expenditure keeping in mind that this could be used against or for you in a court of law if a party to the estate decided to challenge your accountability in court

o   Do research and make enquiries on any and every required expenditure you’re not sure about so that planning becomes much easier

o   Don’t be too hire-happy for just about every task at hand, you’re either cut out for the job or you’re not, and you even have the choice to opt-out; if you do decide to take on the task, do absolutely everything you CAN – on your own, leave what you absolutely CANNOT to whoever’s in a better position to help

 

Challenge #3 – Dissatisfaction of Heirs/Beneficiaries

There are countless situations that could bear dissatisfaction from the heirs and beneficiaries, with the Executor on a strategic receiving end...

Discontentment and discordance amidst the beneficiaries can be the most emotionally overbearing challenge Executors face, and it doesn’t make it any easier if the Executor is a member of the deceased’s family, or one among the named beneficiaries.

There could an unimaginable number of reasons for tension amongst beneficiaries of an estate (with jealousy and inbred rivalry coming top on the list).

With regards to selling a house in probate, the following are probable matters that the heirs/beneficiaries will disagree on or have issues with:

·       Whether or not to share ownership of the house as is (if stated so in the last will)

·       Whether or not to sell the house;

·       The cost at which the house will be sold (irrespective of its current valuation and appraisal)

·       Who gets what from the returns of the house sale

·       The time it takes to finally get the house sold

It’s unbelievable how heirs can become utterly stubborn and difficult to deal with! They can adeptly complicate the Executor’s work with issues such as sibling rivalry, perceived “unfair sharing” among many other concerns (petty or otherwise).

The beneficiaries undeniably come out tops as the greatest culprits in making the Executor’s life as unbearable as can be during the entire probate period. Dear Executors, don’t say you never got this warning!

Executor’s Tip for Issue #3

o   Never make assumptions: Always check with the beneficiaries, or at least make it known to them WHY, WHEN, HOW, and WHAT you’re doing, will do, can do, should do, won’t do and shouldn’t do

o   Remember, you are answerable and responsible (two big words interchangeably used with “liable”): Keep tabs with the steps you take and decisions you make – you should be able to explain your reasons (even in a court of law), justify them, and most importantly, make sense out of them

o   Don’t check your heart at the door: You’re dealing with humans just as you are yourself, so don’t expect heartbroken, emotionally aggrieved persons to be more graceful than the British Royal family – be compassionate and understanding yet executive and decisive

o   Don’t forget your representation: Who/What do you stand for? Why are you an “Executor” in the first place? If you keep asking yourself these 2 questions, you’ll not find yourself compromising on your delegated task or on the deceased’s wishes

Challenge #4 – Finding a Buyer – Getting a Good Price

Would you rather buy your takeout straight from the counter or get it at home after you’ve had to enter a contract with the food joint, given them your credit card details, home address, health records (food allergies and all)—the whole nine yards...?

A great deal of protocol is involved in the selling and buying of probate houses, and homebuyers aren’t the biggest fans of such protocol—wouldn’t it be easier to just get your takeout without the formalities of a travel visa?

From not-too-pleasing disclosure forms to appearances at court hearings and a transaction that could take so long to mature; it’s not hard to see why many buyers shy away from houses in probate.

On the flipside, some homebuyers believe that they can strike a better deal and hence get greater bargains when buying a house in probate and this could be a selling point for Executors looking to make a quick-sale.

It’s one thing to find a buyer and a whole other to get a good price—both of which can prove challenging for the Executor, and especially to those with no prior experience as executors of an estate.

So why is it difficult to get a good price for a house in probate?

·       First and foremost, if there’s a ready market for company shares at the stock exchange then we can’t quite put it the same way when it comes to real estate property; because of that, it’s far from possible to get a really good deal in a short period of time

·       Most sales for probate houses don’t have much time for the house to be in the market as long as it will take to get the best deal, and with mounting pressure from hasty expectant heirs and the probate courts to back, many Executors find themselves compelled to settle for a “not-so-bad” buying price

·       Because of the nature of disclosure associated with houses in probate, experienced (or informed) homebuyers may not be too willing to part with the deserving market value for the house—even with an appraisal or official valuation

·       Many buyers would rather “play safe” and commit a smaller price to start with because the transfer of the probate house is not guaranteed, they may or may not actually end up getting the house which will probably go to court for bidding…and the list of probabilities goes on and on; the complexities of buying a house in probate aren’t exactly known to excite fat checks

It’s hard to pay through the nose when your nose is already pinned to the grindstone... Simply put, and just like the takeout example, the heartache and trouble of acquiring probate real estate often makes it harder to get a good price—especially when dealing with a discerning buyer.

Executor’s Tip for Issue #4

o   Start with a slightly unrealistic list price for the probate house, i.e. start a little higher so that if prospective buyers undercut the list price (which they ALL will!), they won’t take you to a price way lower than your expected value

o   It’s easier to land on your desired value from a higher value. If you start at your desired value, the only way you’ll stick to it is with a “non-negotiable” tag (the ultimate sale killer!)

o   Don’t feel bad about it, this IS business and if you can’t make a profit, making a loss should NOT be an option!

 

Challenge #5 – Time Taken to Sell the House in Probate

As we had previously discussed in “How to Sell A Home During Probate”, the procedure in selling probate houses is grueling, complicated, thorough and most importantly, governed – legally bound and carried out under the strict direction of probate courts.

The duration could be shorter if the Executor is granted full authority (under the IAEA) to process the transaction without necessarily going to court for an approval. However, if the Executor acquires limited authority to sell the probate house, then it could take a long while before the house is actually sold.

It could be anything from a few months to over a year...between the Executor’s petition to sell the house and the actual transfer of property title to the new owner.

For everyone’s sake, it’s important not just for the Executor to know this and hence be psychologically prepared, but also for all other involved parties to get in on this fact.

The beneficiaries could cause a stir if it takes longer than anticipated, and the buyers might threaten to sue (“I just bought that house, so why can’t I get it?!”)… By putting everyone on the same page, you’ll be making your life and work so much easier.

Executor’s Tip for Issue #5

o   Do not shy away from disclosing the nature of the transaction to both the heirs and the prospective buyer

o   Protect yourself (and potentially the estate) from liability by giving the buyer(s) a contract(s) with full disclosure

o   Have a projected schedule and clear plan so that no more time is wasted, it’s bad enough that judicial protocol can delay everything—just don’t try to beat the courts at that!

From dealing with multiple parties (2nd, 3rd, 4th...) to acting as the pacifist among feuding beneficiaries, to being liable as a fiduciary trustee of the estate, the Executor’s job is not as fun as shooting hoops but it doesn’t have to be as hard it’s imagined to be. If you’re elected as an Executor, know what’s expected of you, acquaint yourself with the highs and lows of the job, and just don’t forget the top 5 issues for Executors when selling a house in probate.

 

ADDITIONAL RESOURCES

·     EstateSettler.com – FAQ

·     FreeAdvice.com – Executor of Will

 




Transparent