The process of selling real estate (real property) through probate or trust is a series of court-regulated steps that must be carefully monitored and managed. Deadlines are unforgiving, documentation is specialized and the court’s oversight must be honored throughout the marketing, offers, negotiations and sale of the property.
In addition to the personnel of the court, the sale generally involves the Executor or Administrator of the estate, the attorney representing the estate, a real estate agent representing the seller (the estate), one or more buyers and the buyers’ real estate agents. Each of these individuals must follow the guidelines and deadlines of the court.
Because of the involvement of the court, probate and trust sales have a vocabulary all of their own (see glossary). They also involve various disclosure documents that are not used in other real estate transactions.
If you are selling or buying real property through such a transaction, your real estate agent should be experienced in probate and trust sales and be able to explain the language, the documentation and the steps in the process. Clear communications are vital.
To help you understand the probate and trust sale process, here is a list of some of the steps involved in a typical transaction:
Appointment of the Administrator or Executor of the estate.
In most cases, the decedent’s will names an Executor who is designated to handle the distribution of assets, including real property. If no Executor is named, if the named Executor is unwilling to serve or if there is no will, the court appoints an Administrator to carry out these duties. The Executor or Administrator is the person who has the authority to list and sell the property. Neither a listing agreement with the realtor nor the contract for the sale of the house can be signed and completed until that person has been identified.
Establish a List Price for the Property.
The Executor establishes a list price for the real property. The price takes into account the appraisal price (done on most probate and trust properties) and is usually determined with the assistance of a real estate agent experienced in probate and trust sales. The property is then listed for sale through that agent/broker.
Market the Property.
The real estate agent markets the real property to the public as aggressively as possible to attract the highest offer. This generally involves a number of approaches, including signage, newspaper advertising, listing on one or more real estate websites and hosting open houses for other real estate agents and potential homebuyers. The real estate agent will also schedule appointments to show the property to interested parties who inquire directly. Also, if the agent is an experienced probate realtor, they will likely have a following of investors that check their website often for marketed properties.
While buyers of probate and trust real estate may be looking for a bargain, their range of offers are regulated by the court. Once a buyer is found, the real estate agent assists the seller in negotiating terms that are satisfactory to both parties.
Probate Court Process. (See flow chart)
Step #1: A Petition to Sell Real Estate is filed. The heirs must consent to the sale of real property. The goal is to have the heirs give their consent to sell before the property goes on the market. They can also waive their rights to a hearing on the petition to sell real property, which can significantly speed up the sales approval process in court. If the heirs object, a court hearing will take place. If there are no objections, the sale may proceed without a court hearing.
If the Executor/Administrator does not have full independent powers, or if one of the heirs poses an objection to the Notice of Proposed Action, notice of the sale must be published in a generally distributed local newspaper (unless the will does not mandate such action).
Step #2: The property is marketed by the realtor. Once the terms have been agreed upon, a Report of Sale is filed with the court. In both Missouri and Kansas, the court will not approve the sale unless the sale price is at least 75% of the appraised value (unless interested parties consent to a lower price). The Report of Sale must be filed with the court within 10 days of the contract date, which coincidently is the same amount of time for inspections to be completed. This means that if the buyer is not accepting the house as is, there is not enough time for negotiations after the inspection period so no concessions can be made on the price once it’s sent to the court for approval. This is huge because if the buyer is asking for work to be performed by the seller, the seller must pay for it out of available funds in the estate instead of reducing the price of the home.
Step #3: Once the court blesses the transaction, any agreed upon work will be completed on the property, review of title work will occur, and the buyer loan approval process will be completed (if any) and the closing will be finalized.
If you need assistance selling real property through probate, trust or conservatorship, call AC360 Realty today, 816-591-3908 Missouri, 913-440-4238 Kansas.