Selling a probate property is fraught with the potential for costly mistakes that will limit the proceeds of an estate. Meaning, less money for distribution when the estate is finally settled.
The good news? With a little bit of knowledge and experienced guidance in your corner, you can avoid many of these mistakes. You can maximize the proceeds in the estate of a loved one.
That’s the topic of today’s article. We’re going to dive into 7 costly mistakes selling a probate property that will limit the estate proceeds. We will also look at how you can avoid all of these mistakes.
Yippie! Let’s get started.
What is Probate?
I never want to assume an existing knowledge of probate. So, let’s start with a simple definition of probate and the process.
If you’re already familiar with probate from past experience or previous research, you can skip a bit further down the article.
Or, read on for a quick refresher.
Probate is the formal and legal process that occurs after the death of a loved one whereby their estate is distributed legally and fairly according to a valid will or the laws of the state.
The process typically involves:
- Finding and inventorying the deceased person’s property — both personal and real;
- That property is then appraised;
- Debts and taxes get paid;
- Property is distributed according to the will or state law;
While the process highlighted sounds simple, there are several areas that can cost the estate. Leaving less money to distribute to heirs or those listed in the will.
For a more detailed explanation of probate, check out this read on NOLO.
And, for more specific questions about probate law, definitely seek out the counsel of an attorney experienced in probate or estate planning.
With that said, let’s dive into the costly mistakes people make when selling a home in probate.
Mistake #1: Selling Without Authority
Maybe you’re the heir. Maybe you’re named as an executor on the will.
All of those may be true, but it might not mean that you have proper legal authority to list the home for sale.
There are several instances that could prevent you from being able to list a probate home for sale. For example, has the will be proven and verified in court? Does the will have specific instructions on what you can and cannot do with the home?
At the end of the day, it’s the courts that will determine who has the proper authority to sell the home. They will use the state laws or a will to guide them on designating someone to administer the estate and be responsible for selling a probate property.
If you list a home without proper authority, you may find yourself in some legal hot water that could end up costing you in time and money.
Make sure to seek the counsel of an attorney and make sure that you have the proper authority to list the home. An experienced probate real estate agent can, at the very least, provide some guidance, point you in the direction, and identify any potential barriers to being able to list your home.
Mistake #2: Waiting Too Long
When it comes to probate, you need to start immediately. Failure to do so can cost you. The longer the home sits in probate, the more the expenses that will have to be paid from the estate.
Limiting the proceeds once all the dust is settled and probate is complete.
The probate process, depending on which procedure you must follow, can be a long, long, long process.
According to Barberi Law Firm, “For unsupervised and supervised probates, the process of probating the estate will generally take at least seven months to complete. Many factors can extend this time period… In some cases, complexities in the administration of the estate or disputes can result in it taking years to complete probate.”
Get started in the process early and always, always process tasks quickly. Do not be the reason there is a delay in the probate process.
As soon as possible, you should file the necessary paperwork to start the probate process, begin looking for a probate attorney if you need one, and start your research for finding a probate real estate agent.
Mistake #3: Failing To Designate A Caretaker
Homes need maintenance. Even when they aren’t lived in.
From the occasional cleaning, to mowing the lawn, to checking on the security of the home.
Failing to properly maintain the property can result in a wide range of issues. It could be a simple issue.
Or, they could be more costly and complex. For example, a large fine and bill from the city because the grass was overgrown. Worse, frozen pipes could burst and the basement could become flooded.
I have seen it all.
It’s a good idea to designate a caretaker. If you’re fortunate enough to live near the home, this could be you.
Otherwise, look for alternative options.
Other family members. Neighbors. A house sitting company. A vacant property management company.
Point is, the property will need to be cared for. You have an extra challenge if you live out of state. I’ve had plenty of clients who live in California and mom’s house is in Lansing, Michigan.
It’s not easy, but it has to be done.
A good vacant property management company should be able to help connect you to the services needed or provide them in-house. You may even be able to enlist the help of a real estate agent who can connect you with different providers that can care for the property.
Yes, it will cost money to take care of the party using third-party services. However, it will save you in the long run. The last thing you want are frozen pipes and a flooded basement in the middle of March in Michigan.
A property not taken care of will cost you far more at the end of the day — from fines, costly repairs, or having to sell the home for less.
Mistake #4: Not Managing Risk & Insurance
It’s a common assumption that standard insurance is sufficient liability coverage for a home in probate.
It could be. But, most of the time, it’s just not the case.
A lot of insurance coverage is automatically restricted or canceled after a given period in which the home is left unoccupied, or vacant.
This is usually anywhere from 30 to 60 days.
After that, you may not be adequately covered and any insurance claims could be denied.
Imagine that. The pipes burst in March, the home has been vacant for 90 days and the insurance company won’t cover the claim since the home was vacant.
That’s ONE BIG COSTLY MISTAKE.
Even worse, if you are named the executor and you failed to maintain the proper insurance on the property, YOU may be held liable for the damages.
There are two recommendations I have for people. First, call the insurance company and be transparent about the situation. Up the insurance coverage as needed. There is a good bet this will raise the insurance rates.
Second, don’t let the home sit unoccupied. I have seen some clients get creative with this.
One client I knew had their nephew who was 19 live in the home and watch it. He enjoyed it because he had a place to himself for a few months and the property was taken care of.
Now, the requirements and the workability of this has to be evaluated on a case-by-case basis and you will need to talk to an attorney about this.
Mistake #5: Hiring Any Agent
It makes perfect sense to find a real estate agent that you have worked with in the past or ask friends for recommendations. However, this could be a mistake when it comes to selling a home in probate.
That’s because selling a traditional home and a home in probate are not the same.
They have subtle differences.
Nuances.
Exactly how different will depend on your situation.
Either way, an experienced probate real estate agent will be able to help you through the various situations that could arise.
These agents are informed and knowledgeable about the details, the required paperwork and contracts, and seller’s disclosure requirements.
A traditional agent may not be well-versed in these manners.
And, that could end up costing you.
For example, if everything isn’t in order at the final probate hearing, the judge won’t likely allow the estate to be closed. You’ll need to reschedule a court date, causing a delay and expense to the probate process.
When it comes to selling a home in probate, it’s best to go with experienced probate realtors. No matter how much you loved your past real estate agent.
Mistake #6: Getting The Appraisal Incorrect
Setting the home’s value is critical. Go too high on the appraisal price, and no one will buy it.
The house will sit. You’re stuck maintaining (or hiring someone to do it for you). When you or the estate start to run out of money, the home falls into disrepair.
When and if the home finally sells, there might not be enough equity to cover the cost of repairs and maintenance. Eating up any of the proceeds that could have been in the estate.
Go too low… well, you might sell it, but more money could have gone into the estate for settlement.
Getting the appraisal price right from the start is critical to successfully selling a home in probate.
Look for an agent who is well-versed in evaluating a property’s value. Don’t take it for granted and assume that every real estate agent knows how to value a home properly.
They don’t.
To qualify an agent, you can find an agent that has a Broker Price Opinion Certification by the National Association of Realtors. However, this is being phased out, so you’re less likely to see this.
Instead, you can find an agent that is certified as a Price Strategic Advisor by the National Association of Realtors.
These are requirements, but at least you know your agent is qualified to provide a more accurate price for a home in probate.
Mistake #7: Not Understanding the Real Estate Market
While there are a lot of unique qualities about a home in probate, at the end of the day, the home is being listed on the market.
For that reason, it’s important to have an understanding of the real estate market. It’s especially important if there is a gap between when the home is appraised and when it is listed.
In certain markets, a few months can cause dramatic swings — up or down — in a home’s value.
Stay up to date on the real estate market. You can get this information from general sites, like Realtor.com or you can find real estate market updates like the ones we publish on our blog from time to time.
It’s important to understand the market so that when you go to list it, you list it at the right price. Not too high. Not too low.
I call this the Goldilocks Strategy: Not too high. Not too low. It’s juuuusssttt right.
In The End…
Probate will have its challenges. I have little doubt about that. But, armed with some of this knowledge, you can avoid several pitfalls that end up costing an estate in both time and money.
Save yourself as much heartache as possible and avoid these mistakes.
If you’re looking for expert probate real estate guidance, we can help you. Our probate realtors are here to guide you through the selling process so that it goes as smoothly and quickly as possible. They can help you avoid these pitfalls that end up costing the estate.
To learn more about work with us, you can contact our office and we would be happy to connect you with an experienced real estate agent in probate.
