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How to Sell a Home During Probate

How to Sell a Home During Probate

How to Sell a Home During Probate

When a loved one passes away, they leave behind not just their friends and family, but their possessions and property as well. Some people pass away having already left behind their last will (Testate), but others die Intestate—without having left behind their last testament. In both cases, their property and possessions need to be legally and officially reassigned to the beneficiaries/heirs in a court of law, and in accordance to the deceased’s will (where applicable). This legal procedure is referred to as Probate and we’ll delve into how to sell a home during probate.

Probate is a thorough and extensive process; it entails, among other things, validating the last testament where one was left. In the case of death intestate, the state probate court oversees the reassignment of the probate property and to which beneficiaries.

Parties involved in a probate house sale

While the sale of regular property may involve as little as two parties or three at most, the same does not apply to a probate house. A probate sale is compounded by the involvement of the courts as well as the deceased’s survivorship.

The different parties involved are as follows:

1.    Executor – (Applicable in a Testate case) This is the person pre-named in the will by the deceased, and one appointed by a probate court to: fulfill the terms and conditions of the last testament, manage and maintain the deceased’s estate, oversee the sale of the deceased’s probate property, and to administer the payment of taxes and debts.

The Executor is also called: “Executrix” (where female), or “Personal Representative”.

2.    Administrator – This is the individual legally appointed by the probate court to oversee the management and administration of the deceased’s estate in the case of an intestate death (no will left).

An Administrator may also be appointed in the case where the named Executor in a will is either unwilling or unable to carry out the estate’s management.

3.    Survivors – These are the heirs and beneficiaries of the deceased; the heirs mentioned in the will for inheritance, and the beneficiaries named for survivorship and estate transfers.

4.    Attorney – This is the legal representative of the deceased’s estate in a probate court.

5.    Selling Agent – This is the dealer (usually a real estate agent) responsible for the sale of the probate property.

6.    Prospective Buyers – These are the various parties interested in purchasing the probate house on sale.

7.    Buying Agent – This is the agent(s) representing the prospective buyer(s) for the probate house being sold by the Selling Agent
It cannot go unmentioned that each of these parties should adhere to the specific state probate laws, the requirements and guidelines of the probate court, as well as the stipulations of the deceased’s last will.

And what about selling a home during probate? Well, here are some of the primary aspects, or as eHouseOffers puts it, “D-factors” of selling real estate during probate:

•    Documentation
The process of selling, just like probate itself, will entail a great deal of documentation and paperwork. You must get your figures right, have all the required documents together and keep all the records up to date. This is where legal counsel will be most needed to ensure that everything runs smoothly and in accordance to the law. Your lawyer should help you identify all the necessary documents and oversee the filing process with the courts and all other involved parties. Your legal advisor should also help you interpret some of the legal documents that you’ll be presented with, as well as any other contracts you’ll be required to participate in as a signatory.

•    Disclosure
Selling a house already in probate is not entirely similar to selling any another property that has nothing to do with a deceased person’s estate. Nonetheless, disclosure is indeed a common aspect and you’ll be faced with requirement to file certain disclosure documents with the probate court. On the other hand, disclosure does go beyond the courts.

The selling agent should present disclosure documents to the estate administrator/executor, and/or beneficiaries, highlighting the agent’s role and involvement in the sale of the house. The real estate agent must also openly disclose all aspects of the probate house to the prospective buyers making offers. Some of the documents cover disclosure for: the property’s condition, any entailed encumbrances (hindrances or burdens) of the transaction, the house’s appraisal, property insurance, tax certification, the probate house’s price and interest rate, any revocable clauses of the contracts, among numerous other documents.

•    Deadlines
Brace yourself for more than enough deadlines that have to be met for things to run smoothly when it comes to probate house sales. There will be court deadlines to be met, tax deadlines to be honored, deadlines for all involved creditors to stake their claims, deadlines for the heirs to accept or decline offers, and even deadlines for interested buyers to deposit a state-defined percentage of their offers before and after the court hearing.

These are just some of the few deadlines you’ll be slapped with, and it would be wise to keep a clean and conspicuous itinerary just so you don’t find yourself “overdue”...a legal advisor with probationary experience may come in very handy.

•    Direction
You cannot afford to ignore the direction of the courts, and that of the deceased’s last testament. Over and above, so long as matters go probate they simply go judicial – when the probate court says “Jump!” you must do so and not any lower than directed.

Again if you don’t know the probate regulations and intestate laws of your state, you won’t know it when you’re breaking them either! This is why legal counsel is, yet again, of paramount value to you especially if you can afford it.

•    Dealer
When you finally come down to actually selling the house, you’ll be faced with the decision of picking a dealer for the transaction. Think of the dealer as the agent or channel of sale and the following are typical picks:

1) Real Estate Agent

The good thing with using a real estate agent is that you’ll be dealing with someone whose specialty is in just that – selling house. A real estate agent knows the current trends in the realty market, the current market prices as well as the price-cost margins and rates. The agent will also have better exposure to the market and target customers for your home; he/she will probably have a couple of potential buyers already in mind, all of whom are just a phone call away.

Your agent should aggressively market and advertise your probate house so as to strike the highest, most competitive offer for the property. All imaginable mediums may be used, just as is the case with a non-probate house on sale, and they include: online advertising on websites, notices in the dailies, signs, realty directory listings, and even showcasing open-house dates for any house-hunting buyers. Once interested buyers are established, the agent can then set appointments where the buyers can get a personal guide around the property as the agent pitches them for a deal.

(Remember: Not all real estate agents are made for the job...perhaps for reasons of greed, misplaced work ethic or just plain unprofessionalism! You therefore need to be discerning when settling on an agent. The agent should be well versed and conversant with probate home sales and the specific requirements for probate real estate in your area; and so long as you get a realistic, reasonable price for the house, then you’re good.)

2) Real Estate Auctioneer
This is yet another good option you could employ in the home sale due to the conclusive nature of an auction. You can also expect a realistic and competitive price for the probate house at an auction.

Whichever your choice for a dealer, you’ll have to file that specification with the probate court so that the release forms and pending approval documents can be obtained. These will be vital for the transaction since any prospective buyer will have to be presented with the court’s approval alongside any other appraisal documents certifying the validity and quality of the house.


•    Duration

The probationary period could be quite long...we’re talking about months on end if not even years in some instances. Rest assured, selling a house in probate is not some quick-buck affair...but that’s not reason for you to flout the rules just to speed up the sale!

There are many circumstances that could delay the sale of a probate property; a swift sale may be possible, but only where all concerned parties have no objections to the sale and hence no need for a court hearing to approve and confirm the final sale.

The duration of probate (and hence the duration of a probate home sale) greatly depends on:

•    the time it takes before the Administrator/Executor gets the court’s approval and title to sell
•    the cooperation and concordance of the involved beneficiaries
•    the magnitude and complexity of the deceased’s estate
•    complications in settling the deceased’s liabilities, debts and taxes
•    intricacies of the estate transfers and asset division

The probate courts may limit the estate Administrator/Executor in accordance with the Independent Administration of Estates Act (IAEA). This means that the Administrator/Executor must first acquire the probate court’s confirmation before closing the deal on the sale.

General steps taken when selling property in probate

Probate laws are state-dependent and so goes the requirements when selling real estate during probate. However, there typically are some general steps that can be highlighted as follows:

1.    In a Testate case, the named Executor is appointed by a probate court, whereas an Administrator is court-assigned for an Intestate case and in accordance with the (IAEA) Independent Administration of Estates Act
2.    The Executor/Administrator then acquires an appraisal for the probate property from an Appraiser approved by the state – the Appraiser provides an independent and current appraisal of the property, with the valuation and appropriate list price for the probate house
3.    A petition for the sale of the house is then filed, seeking to monetize the real estate either through a property auction or via a real estate agent
4.    The Executor/Administrator then acquires the court order approving the sale of the probate estate; this may either be limited or full powers as per the IAEA
5.    The Personal Representative then drafts the necessary disclosure documents and contracts that will be presented to prospective buyers and used in the probate home sale
6.    In the case where a real estate agent is brought on board, the probate house is listed in the market, advertised, and set for viewing by interested buyers; the agent can then find and meet buyers with relevant offers (these offers should be more than the list value and not less than 90% of the property valuation)
Where a real estate auctioneer is preferred, a date is set for the property auction, official notices are relayed to the public so as to alert all interested bidders, the property is auctioned and the handsomest bid is obtained
7.    The dealer or sales representative (auctioneer/agent) then enters into an agreement with the most promising buyer (one with the best offer against the list price) – this buyer signs a contract stating that the sale is not guaranteed, is bound to a hearing, and is dependent on the probate court’s decision
8.    Once all buyer eventualities are covered, an official notice is presented to the concerned heirs and beneficiaries, informing them of the buyer’s offer and the proposed terms arrived at with the Administrator/Executor
9.    The beneficiaries can then agree or object to the terms presented in the buyer notification from the Personal Representative

10.    At this point, either of these steps then channels take suit

For the Administrator with full authorization from the probate court:

i.    A notification of the sale plus the buyer’s offer is then made public
ii.    Any higher bidders with offers exceeding the initial buyer’s come forth
iii.    The Administrator may then choose to or not to file for a court hearing
iv.    If the court hearing is opted out, and once all parties agree on the best proposed terms for the sale, the Administrator can then close the deal in accordance with the last testament where provisions for the sale (“ the how” and “the when”) had been stipulated in the will
v.    If the Administrator chooses to take the sale to probate court, the procedure for a limited Administrator (see below) pretty much applies from here
For the Administrator with limited authorization from the courts under the IAEA:  
i.    The probate court is petitioned for a hearing so as to seal the deal with the necessary approval
ii.    The date of the hearing is then set, and it may be post-dated for 1-2 months’ time depending on the court’s schedule
iii.    The prospective buyer then makes a deposit of 10% of the buying price prior to the scheduled court hearing (there’s usually enough time for this before the set date).
iv.    The Executor also administers a public notice of the proposed sale, the terms and a welcome note for any interested buyers with higher bids to join the open bidding in court – the aim is to get the best proposed offer for the probate house
v.    All involved parties, including the initial buyer, and additional bidders make a date with the court on the day of the hearing, and the bidding process is set in motion.
vi.    Bidders are expected to be fully aware of the nature of this type of sale:
a.    the transaction is unconditional.
b.    they should be aware of the property’s condition beforehand.
c.    they should be ready to instantaneously finance at least 10% of the list price (or a court-amended amount) by way of a cashier’s check (and not a personal check).
d.    the winning bidder’s ten-or-so-percentage deposit is non-refundable if this bidder defaults to complete the remaining payment once after the probate court has confirmed the property’s sale.
e.    the original buyer, who has also paid a deposit, is bound to get a refund of their deposit if the sale is awarded to a fellow higher bidder – but if the original buyer wins the bidding, then his/her deposit is accrued to the price agreed in court.
f.    in essence, the winning bidder (who could be any one amongst those present at the hearing) should “come with no conditions” but altogether “meet all the court’s conditions.”
vii.    Bidding starts with an initial value and progresses by an incremental amount, both of which are determined by the probate court, depending on the statutes for your particular state; all bidding is unconditional, and once a final offer is arrived at, all bidding then ceases
viii.    The selling price agreed in court, and thereby awarded to the winning bidder, must be no less than 90% of the property’s current valuation as had been appraised by an independent Appraiser.
ix.    The sale is then closed and all pending/relevant contracts are entered into with the concerned parties – including title deed transfers and any other documentation from the courts.
x.    All returns obtained from the sale of the probate home can then be channeled back into the deceased’s estate for transfers and division of assets as per the will or probate court’s direction.
Unique state laws governing probate home sales
As earlier mentioned, the above steps are what you would generally expect to take place when selling a home during probate. However, there may be a few twists and turns and some specific statutory steps depending on your state since the probate courts are not federal institutions but state-owned arms of the law.

Keep in mind that not all states have a fully-fledged probate court system. Instead of the separate probate courts, some states use other courts (e.g. the Magistrate Courts, Superior Courts, Circuit Courts, etc) to overlook all probate issues.

To save you the heartache of skimming through thousands text for unique laws not pertaining to your specific state, you can skip straight home and zoom to your zone by visiting the following directories:

•    EstateFinance.com - State Probate Laws
•    FindLaw.com – Estate & Probate State Laws
•    ProbateEstate.org – Probate Requirements by State
•    EstateSettlement.com – Probate and Estate Settlement Laws
•    FindLaw.com – State Probate Courts

All said and done, there’s no telling that if you’re thinking of selling a home during probate, you’ll have your work all cut out for you…but it’s better to have that position when informed than otherwise!

ADDITIONAL RESOURCES:

•    IRS.gov - Probate Proceedings
•    EstateSettlement.com - Probate FAQs
•    RealEstateLawyers.com – Probate Real Estate Investing
•    SeniorDirectory.com – Real Estate Transfers
•    QuickProbatePropertySales.com – IAEA
•    Avvo.com – Selling Real Property During Probate

* The guide below does not constitute legal advice and is provided for your information only.




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