Real property is often the main asset of an estate. The home may be sold during the probate process but only by someone with legal authority to manage the estate assets. The Personal Representative (executor) must be formally appointed by the Probate Court to have authority over estate assets.
The probate process begins with petitioning the court to appoint a personal representative of the estate. If there is a will the court will issue ‘Letters Testamentary’ to the personal representative. If the decedent died without a will (‘intestate’) then the court will issue ‘Letters of Administration’ to the personal representative. These documents show the personal representative’s authority to manage estate assets. The personal representative should immediately contact the insurer to inform it that the home is no longer owner occupied to ensure the homeowner insurance policy remains in force.
Once the personal representative is appointed by the court and notice of the probate is published, a four month notice to creditor period begins to run.
The personal representative may sell the real property during this four month period but needs to take certain steps:
- Work with an experienced probate attorney and realtor knowledgeable with selling real property during a probate.
- Have the real property appraised by a licensed real property appraiser to establish a date of death value.
- Consider a market analysis to determine an asking price for the real property.
- Obtain court approval to sell the real property.
- Make sure that all the beneficiaries are informed and in agreement with the sale of the home.
The personal representative is exempt from seller disclosures. However, if the personal representative is aware of any issues with the home these should be disclosed to prospective buyers. The personal representative should provide the title company with a copy of the Letters Testamentary or Letters of Administration and the tax identification number for the estate. The personal representative signs the sale documents, including the deed to the third party purchaser. Any encumbrances on the property, including property taxes and loans, will be satisfied at closing. Once the sale is finalized the net sale proceeds must be deposited into an estate account. The sale proceeds can be used to pay valid claims against the estate as they arise and the balance distributed to the beneficiaries after the four month notice period runs and the court approves a final accounting.
The benefit of selling a home during probate is that only the personal representative needs to sign the sale documents and the net sale proceeds become available to help pay valid claims against the estate. If the home is not sold during probate then the personal representative distributes the home to the beneficiates via a personal representative’s deed at the end of the probate with prior court approval. If the beneficiaries then wish to sell the home all the beneficiaries must sign the sale documents, which can complicate and/or delay the sale process.
If the fair market value of the real property is no more than $200,000 and the total fair market value of the entire estate is no more than $275,000 then a Small Estate Affidavit may be used in lieu of a full probate. To avoid the need for a probate entirely a Revocable Living Trust may be used. It is important that the trust is funded properly, including transferring the home to the trust, in order to avoid probate.
An experienced Probate and Estate Planning attorney can help you understand the probate process and your options for selling real property during the pendency of the probate. Contact the probate attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.
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