In the weeks and months after a loved one dies, there are many things to do and decisions to make. One of the last things people think about is selling their relative’s home. Here’s your guide to selling a house in probate. Whether you’ve inherited the house or are the executor of the estate, there are many steps involved in selling it. It’s helpful to understand the process and know what to expect when you’re ready to sell your relative’s home.
For most people, selling a house is a stressful and complicated process. There are several considerations to take into account, like negotiating a fair price and the act of moving. When you’re selling your property during probate, this process can become even more fraught and difficult. Here’s a quick guide of things that you need to know about buying or selling property during probate, including what a probate sale means and some insight about the process.
What is a Probate Sale?
A probate sale is a court process that’s used to settle the estate of a person who has died. The probate process is used by the courts in all states to settle the estate of a decedent. The house and other assets are often sold and the proceeds are distributed to beneficiaries. These beneficiaries could be their spouse, children, grandchildren, parents, siblings, and more.
During the probate process, a court determines which assets should go to which beneficiaries according to the terms of the last will and testament, or the laws of the state where the probate court is located. The probate process varies by state.
In the context of real estate, the probate sale meaning refers to the sales of real property in probate. It is the act of selling an inherited home after a loved one dies.
When is Probate Necessary?
The rules of when probate house sale is necessary vary based on the total size of your loved one’s estate, whether they had a will in place when they died, and where they lived. Generally, probate is necessary when:
- A loved one dies with a will and the court must implement certain provisions of their will
- A loved one passes away without a will
- If the total estate is larger than a set threshold for your state
Most states have special provisions in place to simplify the probate process for small estates. If your loved one’s spouse or other relative lives in the home and doesn’t plan to sell it, they might be allowed to pay taxes on it and live there. This depends on where they live and other aspects of the estate.
Additionally, there are ways to structure a will to avoid the probate process. If you have any questions about whether your loved one’s estate needs to go through probate, it is best to schedule a consultation with an estate lawyer or financial advisor to ask questions about the specific process that should be used in your loved one’s estate. This includes setting up a revocable living trust.
How to Sell a House During Probate
Once you know that you need to sell your house during probate, you’ll need to prepare yourself for the process. The state probate process varies, so depending on which state the estate is being settled in there will be different steps to selling a house. Depending on the size of the estate, the experience of those involved, and how quickly it is needed, this process can take from several months to several years.
To sell a house, you must be an heir or executor. There are different ways to sell a house in probate, depending on the estate and the situation. In some states you must wait for probate to close before selling a house. Some states allow you to sell real estate before probate is closed, which is what many people do.
Steps in the Probate Real Estate Process
While the process varies based on the state the inherited home is located, some general steps in the probate real estate process you can expect are:
1. Filing the Will with the Court System
Your loved one’s will needs to be filed with the relevant court system where they lived and owned property. For small estates, this step might be more of a formality. However, it is an important step because it grants the executors powers to make decisions and act on behalf of the deceased to pay debts and sell the property.
At this point, the court may appoint a probate attorney to help with the process. Depending on how the will was structured and your loved one’s wishes, sometimes family members can inherit the home and do not need to sell it. Once it’s their property, they can sell an inherited home in the same manner that they would sell their own house or choose to live in it.
2. Inventorying Assets and Liabilities
The executors need to analyze the property and belongings to determine their value. Assets include anything of value, such as bank accounts, property, or stock. Liabilities refer to any debt that needs to be paid. These debts may include taxes owed, funeral expenses, and outstanding loans.
3. Liquidating the Estate
The executors execute the will and sell all of the assets in the estate to pay debts. If there is any remaining property, they might choose to liquidate it to divide the proceeds among beneficiaries or give them the property itself, as outlined in the will.
4. Paying Debts and Taxes
Taxes are generally paid immediately regardless of the state. For instance, property taxes should still be paid while the property is in probate. Then, the estate will pay any debts, including medical bills, mortgage payments, and funeral expenses as well as outstanding loans. Most states allow debts to be paid by estate funds throughout the process.
5. Closing Your Loved One’s Estate
The final step in the probate real estate process is to close the estate and file the final paperwork. This requires collecting balances from creditors, distributing property that was left to beneficiaries, and closing any bank accounts. Some estates will require an accounting if they are large enough, which shows where funds went. Estate taxes might need to be paid at this time as well.
Things to Know About Probate When Selling Property
The probate sale real estate process can be lengthy and frustrating. However, there are some things to know when inheriting a house in probate that can make the process easier:
1. Most Estates Don’t Pay a Federal Estate Tax
Most estates do not reach the threshold of the federal estate tax. According to the IRS, estates of individuals with combined gross assets of $12,060,000 or more in 2022 must file an estate tax return. However, the sale of real estate could have tax implications so it is important to work with a reputable estate lawyer or real estate company to ensure that the estate remains compliant with tax laws.
2. You Can’t Sell Property You Don’t Own
It may seem obvious, but you can’t sell property that you don’t own. If a loved one dies, there is a process that must take place when it comes to transitioning ownership. For example, if a loved one dies and has adult children living in the home, the adult children may not be able to sell the house unless it goes through a probate process to transition ownership.
3. Expectations on Value and Price
Many families simply want the process of sorting through a loved one’s estate to be over as quickly as possible. This could make it tempting to accept the first offer or to reduce the price to sell the house fast. Some states have laws in place that require the home to be sold for at least a set percentage of the appraisal value.
4. The Home Might be the Most Valuable Part of an Estate
For many homeowners, their houses are their biggest asset and contributor to their total net worth. By selling the home, the value of the home becomes a cash asset that can be distributed to heirs. In some ways, this allows your loved one’s legacy to continue to impact your family well after they have passed