Handling the final affairs for a loved one can be overwhelming, especially after an unexpected death. Selling your loved ones real estate may be one of those tasks. Seeking the help of a real estate agent is essential, but before you make that call consider some of the key issues you may come across.
Determining who owns the property when selling real estate?
The first step is to determine who is the legal owner of the property. Many families are surprised to learn that their relative was not the legal owner of the home in which they had lived for years. Perhaps the family member had been renting or co-owning the home with another relative or a friend all along.
How do you determine whether your loved one was the true owner? You must locate and inspect the most recent vesting deed for that property. The term “vesting” denotes that ownership is genuine and legal. All the necessary information to determine the legal owner of the land is contained in the deed. By definition, a deed is a legal document that creates ownership of the property. When a property is transferred from a previous to a new owner, the previous owner signs the deed. The deed is then recorded with the regional government office that keeps track of land ownership. Often it is the recorder. Typically, a deed must be recorded before the land can be transferred to the new owner.
The city or county recorder’s office, a title company, or a real estate attorney could assist you in searching for the deed in property records if your loved one did not keep a copy of the recorded deed. You need to find this document to verify whether your loved one actually owned the property.
Ways your property may be titled
After locating the deed, you will be able to determine the type of legal ownership. Since each type of ownership had different legal implications, seeking assistance to understand how your real estate is owned is important. Here are some potential ways your loved ones real estate was owned:
- Trust: If a trust owned the property, you would need to locate the associated trust documentation. This document will advise who the successor trustee when the owner becomes deceased.
- Individually Owned: Laws vary by state. Depending on where the property is located, probate may be required in order to appoint a personal representative, executor, or administrator who has the authority to sell or transfer the land.
- Joint tenancy with right of survivorship: This is the default type of ownership for married couples in many states. If the co-owner is still alive, probate is unlikely to be required. By law, the surviving joint tenant receives full ownership of the land. The heirs of the deceased, as well as the beneficiaries of a will or trust, will not inherit any interest in land titled in this way. To allow the land to be sold or transferred after the death of the first joint tenant, the county recorder may require an affidavit of surviving joint tenant, as well as a death certificate.
- Tenancy in common: If your loved one’s land is titled as tenancy in common, you will probably need to file a probate case. The probate court will appoint a personal representative, executor, or administrator to sell or transfer the ownership of the land so that it is in accordance with state law or the deceased’s will. If one of the tenants in common is a trust, the transfer of that interest is unlikely to require probate.
- Tenancy by the entirety: In some states, this option is only available to married couples. When the other spouse dies, the surviving spouse automatically becomes the full owner of the property. There will be no need for probate. Before selling or otherwise transferring the property, the survivor may need to record a new deed or an affidavit of surviving tenant.
- Community property: Unless otherwise directed by the deceased spouse’s will or trust, the surviving spouse usually automatically inherits the deceased spouse’s interest in the property. Therefore, probate may not be required. However, you may need to obtain a court order to transfer title to the spouse.
- Other: There might be some phrases that don’t fit neatly into any of these categories. If this is the case, speak with an attorney, a title company, or another real estate professional to determine your next steps. Different wording can result in a wide range of legal outcomes.
The next step, appraising the property
Having your loved one’s property appraised as soon as possible is useful for several reasons, including:
- An appraisal by an independent professional will establish the full market value of the property. Knowing this number will help you defend your decision to sell against other heirs or beneficiaries who disagree. This is most important if you sell the property to a family member or a friend or even if you decide to buy it yourself.
- If you sell to an unrelated third-party buyer, an appraisal will help you determine whether you are receiving a fair price for the property. Knowing this information will protect you from accepting low-ball offers. It will also shield you from claims that you are not acting in the best interests of the beneficiaries as the trustee, personal representative, or executor.
- If your loved one’s estate is subject to estate taxes, an appraisal will assist you in determining the estate’s value for tax purposes.
- If you plan to sell the property later, an appraisal will assist you in determining the new tax basis of the property. This number was established upon the death of the previous owner. You will need it to accurately calculate your capital gain or loss when you sell the property.
- Knowing the property’s full market value will help you attain sufficient insurance to cover the property in case any damage should occur while you are administering your loved one’s estate or trust.
Maintaining the property
Your loved one’s property must be maintained until it is ready to sell. If the property has a mortgage, you will need to verify that there is enough money in the estate or trust to continue making the mortgage payments. If not, you run the risk of foreclosure. Foreclosing a property can make your job much more difficult. If the funds are available, ensure that timely payments are made.
Besides mortgage payments, you should ensure that property taxes and any other necessary payments, such as water, electricity, natural gas, yard maintenance, security system, and so on, are made on time. Additional bills, such as phone, internet, and cable bills, may not be necessary services. Keep in mind that certain alarm systems necessitate using a phone line or an internet connection to function properly.
Making the required disclosures when selling real estate
Once you have listed the property for sale, you must ensure that you understand what disclosures about the property are required by applicable laws and regulations. Some states require you to disclose a variety of property conditions to prospective buyers. Failure to do so can expose you to significant liability and, in some cases, litigation. Some of the more common disclosures to be aware of are as follows:
- asbestos, mold, water damage, or lead;
- structural problems;
- boundary disputes;
- mechanical or electrical problems or issues;
- hauntings or deaths that occurred in the home, including natural deaths, murders, or suicides;
- environmental and natural hazards.
Check with your real estate agent or attorney to determine what disclosures are required under state law.
Selling your loved one’s property does not have to be difficult, and it can often be done quickly and efficiently.
An experienced probate and trust administration attorney can help you resolve any legal matters that may arise during this challenging time. You are welcome to schedule a call with us or reach us directly at 855.434.2062 to learn more about how best to plan today to protect those most important to you.