As the Executor or Administrator of an Estate, part of your duties is to liquidate any real estate owned by the decedent. While the process is similar to other sale transactions, there are extra steps- and extra pitfalls- that the estate administrator must consider.
When listing the house with a realtor, try to get more than one professional opinion of the value of the property. As a fiduciary, you have the obligation to insure that you are getting the best possible price. You should also shop for your professionals. Some attorneys, realtors and accountants charge extra when dealing with estates, and those costs can become excessive. Of course, you certainly get what you pay for, but try to make sure that the fees you agree to pay are at least market value. Failure to do so could lead to disgruntled beneficiaries, who might seek to hold you responsible for what they perceive as a loss of proceeds.
You should insure that any multiple listing service description discloses that the house is being sold by an estate, and that you, as the seller, have limited information about the property. Unless you have actually lived in the house, you don’t have the knowledge to make disclosures or representations that a homeowner would normally make- and your attorney should include appropriate language in his or her attorney review addendum to properly inform your prospective buyer of such limitations. If this is not done, you could be held responsible for failure to disclose defects in the property.
The buyer’s title insurer will have several additional requirements for an estate selling property. First, the Executor or Administrator will have to prove that they have been qualified as such. You should provide your attorney with a copy of your Executor or Administrator Certificate, as well as a copy of the decedent’s Death Certificate. Other documents are also helpful. When looking through the decedent’s papers, pull a copy of the Deed, the Title Insurance Policy from the purchase of the property, anything entitled “Affidavit of Title,” and other documents that show the payoff of any mortgages or liens, and provide these to your attorney as well. These will help to clear any issues raised by the title search.
The title insurer will also ask you to complete an Estate Questionnaire. This document discloses the financial condition of the estate, and gives the title insurer an idea of who the beneficiaries are, to determine whether or not any estate taxes will be due, and to document any outstanding debt that the estate may have. If estate tax returns have not been filed by the time of closing, the title insurer will likely require an escrow until it can be proven that the estate has no further liability for estate taxes. If you can prepare and file your returns before closing, showing no tax liability, this escrow can be avoided. This is particularly easy in the case of an estate valued at less than $675,000.00, where an estate tax waiver can be requested from the Division of Taxation by use of a simple, two-page form.
When preparing the new deed, your attorney may require all estate beneficiaries to sign the transfer documents. This usually occurs when the sale is not to a third party in an arm’s length transaction, but some title companies routinely require this to avoid conflict with disgruntled beneficiaries who could claim that the estate representative did not act in the best interests of the estate.
Title insurance companies will always ask an Executor or Administrator to sign an indemnity bond, promising to reimburse the title company in the event that claims are made against the policy by people who believe they should have been paid before the proceeds of sale were released. Few will tell you this, but signing is optional. You do not have to do this, and quite frankly, you should not.
Finally, before proceeds are released to the beneficiaries, be sure to have each sign a Refunding Bond and Release to be filed with the Surrogate’s Court.
We can certainly help you with all of these issues, but you should be aware that services such as these are outside the structure of a usual real estate transaction, and additional fees will apply.
Want more information? Call us for a free consultation.