The Process of Selling a Home through Probate
Typically, the process of selling a home in probate is painful for the parties involved, as it usually stems from the death of a loved one and the process itself can be arduous. Probate is the legal process that takes place after an individual dies.
Through probate, a will is proved valid in court or an estate is settled according to the laws of intestacy (when an individual passes away without a will). This process allows for the assets of the decedent to be distributed to the beneficiaries (where there is a will) or distributes (where there is no will).
A brief overview of the probate process in New York
In New York, where a Last Will and Testament is present and proved valid, named beneficiaries will obtain legal ownership of assets as dictated by the will.
The Executor of the will must file the will in the appropriate New York State Surrogate’s Court, along with a certified copy of the death certificate and Probate Petition. Once the Surrogate Court judge is satisfied with the validity of the will, the Executor is appointed to distribute the assets pursuant to the will.
However, if the decedent died intestate, a valid distributee is required to file for administration. Administration is the process by which the Surrogate’s Court issues Letters of Administration that allow the distributee to collect and distribute the decedent’s assets per New York State law.
Assets will pass through the law of intestacy, by which a spouse obtains the first $50,000 and half of the remaining balance and the children obtain the remainder of the estate. If the decedent left behind only a spouse or only children at the exclusion of the other, the spouse or children will receive the entire estate.
Without a spouse or children, assets will pass to the decedent’s parents; without a spouse, children or parents, assets will pass to the decedent’s siblings.
It is important to keep in mind that every state’s probate laws are different. This becomes especially important where a decedent dies intestate with ownership rights to real property in various states.
The sale of a home after death where a valid will is present
Where a will is present, the will dictates ownership rights of all property, including real property. Once the Executor of the will is granted permission to distribute the property pursuant to the will at the end of a probate proceeding, and does so, the beneficiary(ies)/new owner(s) can sell the home in the same manner as any other sale.
The length of time probate takes depends on several factors such as the complexity of the will, the size of the estate and the venue of the court.
However, in New York the Executor has the power, with the Court’s permission to sell a home under probate. Typically this is done when there is not enough additional property in the estate to satisfy the decedent’s legitimate debts, which are required to be paid before assets are distributed per the will.
Personal property – such as stocks, mutual funds, vehicles or jewelry – are often sold first to satisfy debts. However, where there is still not enough cash to pay off all of the decedent’s debt, the Executor may petition the court for permission to sell the real property.
The first step to selling a home in probate in New York is to obtain a property appraisal through a local real estate agent or certified appraiser. Then, the Executor must seek approval from the Court. The petition must detail the intended method of sale and the information from the appraisal.
Once the Court grants the petition, the property can be placed for sale as usual. This involves preparing the home for sale through repairs, replacements or staging. The average time a home is on the market has increased in 2019, meaning this process may sometimes take awhile.
Once a potential buyer puts an offer on the home, the buyer should be informed that the sale will require Court approval. Professional real estate investors on Long Island have experience in purchasing homes under probate and will never buy property until a Court approves the petition.
However, with Court approval a cash buyer investor is able to make the transition quick. Because of the fiduciary duty on Executor to obtain the best price for the house, this process also requires newspaper advertisements so the public is aware of the sale and the Executor is able to obtain other offers.
Acceptance of an offer requires a hearing before the Court. The Court will allow others present at the hearing to bid on the home; bids start at 5% plus $500.00 above the original offer.
Once an offer is confirmed by the Court, the buyer’s deposit is given to the Court and the Executor enters a contract with the buyer. Closing typically occurs 15 days later.
The sale of a home where the decedent dies intestate
The procedure for the sale of home when the decedent dies intestate is very similar to that of the probate process. The Administrator will need to get an appraisal and list the home for sale, including advertisement in the newspaper to ensure that the public is aware of the sale. After an offer is accepted, there is often a waiting period for the Court to finalize the sale.
However, if the decedent’s only asset is real property, it is often not necessary to file for administration. By law, real property vests in the distributee at the time of death, making the distributee the legal owner at the time of death.
However, it is important to note that without an administration proceeding, it may be difficult to sell the home down the line because of issues with title. The proceeding will serve to rectify title to the new owner.
Because of the complexity of the probate process in terms of real property sales, it is often beneficial to have a team of specialists on your side. These professionals can include a Long Island real estate agent with probate experience or a certified probate real estate specialists; and a probate attorney.
Hiring professionals will not only make the process quicker and more efficient, but it can also remove the emotional burden of selling a home through probate.