As we become older, our real estate needs change. Once what was needing more beds, baths, and/or acreage has pivoted to downsizing, estate planning, wills, and enjoying those later years of life. Sadly, this article will cover items items to consider when selling a property as an estate sale after a person(s) pass away while owning a home or property.
Let's get started.
1. What is an Estate Sale?
In a real estate transaction when a person, or persons, pass-away their home or other types real property, is sold and the proceeds are to be distributed to those person(s) heirs based on deceased person(s) will. This is what we call an Estate Sale which is not to be confused when personal property is sold via estate sale. When this scenario happens the seller is usually listed as The Estate of John Doe Morgan and not John Doe Morgan.
Here is an example from a purchase and sale were we represented the seller and the seller's daughter had a Power of Attorney to complete the sale.
Selling a property as the The Estate of John Doe Morgan is more complicated then having a Power of Attorney. There are many moving parts & pieces to these types of transactions and this article will try to encompass as many items from our experience when representing sellers in an estate style sale.
2. Is / Are the Seller(s) still Alive?
Typically we get calls from family members, brothers/sisters/children, to assist with listing their family member's property for sale and we have to ask if the family member(s) is deceased is never a pleasant moment. The family member could have recently passed making the loss just as painful as the day it happened. Yet, if the answer is a "yes" then that is another discussion that can center around: is the seller of sound mind and understand the intention of selling the property?
3. Does the Seller(s) have a legal Will?
A will is a legal document that dictates what is to be done with a person, or persons, assets upon their passing. A will can determine what happens to the proceeds from; are the proceeds shared between heirs, are the proceeds to be directed to a charity, or they to be held in trust for another purpose. There could be many scenarios that a will can create.
4. Who is/are the Parties on the Property' Title?
Opening up title, as us real estate agents call it, through a local title company - like First American Title & Escrow in Everett - will show all the parties who have legal interest in the property. Whether that be an individual, a married couple, lien holders, and/or the State. By knowing understanding who is on property's title can help determine who needs to be notified and/or clear up any questions regarding ownership.
5. Who are the Parties Involved in the Property's Sale?
As mentioned above, the parties involved can be anyone listed on title and who has legal interest. It can also be the Estate, all legal representation, real estate agents, a HOA, a title and escrow company, lien holders, etc.
6. Are all Parties Involved Located in the same State?
This may not seem like a huge hurdle in 2022 yet some parties may not be comfortable conducting all business through email, phone, and text like others. The reason this important because if the parties involved are scattered across the US or even abraod then it can take more time to prepare all the necessary documents to complete a sale. This is also true after the property is listed for sale and a buyer submits a purchase and sale offer. The parties involved need to be timely in responding to buyer's offer yet distance and time zones may prove it difficult.
7. Do any Parties Involved have Legal Representation?
It is always great practice to have legal representation in an estate style sale. This way wills, power of attorneys, and listing agreements can all be reviewed to make sure the process is being conducted properly since each property and sale is unique. It has our been experience that people don't like hiring attorneys due to cost yet attorneys are able to interpret the law with greater skill and accuracy than non-attorneys. Legal representation can also help answer questions which can be outside the scope of a real estate agent.
8. What is the Financial Situation on the Property?
Another reason to obtain a title report is to see all liens/lien holders that may need to be satisfied at closing. Like a traditional real estate sale, there could be a mortgage yet with estates it may be more complicated. Ask questions like Is the property owned outright?, Is there a mortgage on the property?, Are there more than one mortgage on the property?, Is there a reverse mortgage on the property?, Are there any contractor liens on the property?. Knowing the financial situation can make sure the appropriate process is followed as well as set the exception of what the estate will net at day's end.
9. Will the Estate Sale require Probate?
The definition of probate is: Originally, the proving that a will was valid. Modernly, any action which probate court has jurisdiction - a court having jurisdiction of estates, whether of a deceased, a minor, or incompetent person. Probate can add substantial time to a real estate transaction so knowing upfront if probate, or lack of probate, be required will save valuable time and frustration.
10. Do the Parties Involved get Along?
Time and time again, we see a property proceeds being fought over because one party in the transaction feels they deserve more than others regardless of the legal documents. It is a sad part of the real estate transaction yet is more commonplace than not.
11. What is the Property's Current Condition?
Property condition is important with an estate style sale because it will impact recommended listing price, showing volume, type of financing buyers can use in the purchase, the final selling price, and the seller's net proceeds. It is recommended to get the home or property in the best condition possible prior to listing yet this isn't always feasible since there could be no funds for repairs, cleanup, etc.
12. What Disclosures are Required by Washington State?
One common question always arises: Did someone pass away in the home? In Washington State, deaths in a home DO NOT have to be disclosed. Its up to the buyer to conduct their own due diligence if knowing that information is important.
Another disclosure commonplace in Washington State is the Seller's Disclosure Statement, or Form 17. With estate style sales the seller, The Estate, is EXEMPT from completing the Seller's Disclosure Statement since the The Estate has never occupied property.
This list could continue and we'd be happy to answer any questions that you may have about estate style sales in Washington State. Please comment below and we'll promptly respond.