Real estate transactions can be unpredictable, especially if the previous property owner has passed away and the transaction involves the trust or estate of the deceased. As estate planning attorneys, we have encountered multiple deceased-owner cases where realtors have taken their eye off the ball and landed their clients and themselves in an unnecessary mess of one kind or another. However, the good is that all realtors can take some very basic precautions, utilizing tools already at their disposal, and come up smelling like roses at the closing table. Here’s how.
Ask good questions, be a good listener and use the preliminary title report as the foundation for a successful transaction. On the seller side, make sure that the people you are communicating with about the potential listing are listed as the owners on the PR before entering into a listing agreement or putting a new listing on the market. Do not assume that someone has the legal right to sell the property—verify that they do. This can be as simple as asking your potential client to explain to you in their own words how they came to be the sellers of the property. On the buyer side, look at the PR and ask the selling agent to confirm that the seller already has the legal right to convey marketable title to the property. This may sound simplistic, but it is astonishing what can be learned by simply asking good questions of potential sellers and then verifying their answers with the PR or by contacting the title company for more information if something doesn’t add up. And few things make realtors look bad quicker than learning that a seller can’t close after an offer has been made or, worse yet, accepted. In short, the extra digging isn’t time-consuming or expensive and sometimes pays off in big ways for everyone involved.
Learning that the previous property owners are deceased obviously isn’t the end of the world. On the contrary, the sale of real estate owned by deceased individuals is almost always a blessing to the selling family members who have lost a loved one—unlocking family wealth in the form of equity and allowing for distribution to surviving loved ones—and a great way for buyers to potentially get a better deal. But realtors and their clients may need to adjust their expectations if the transaction involves property now owned by a trust or subject to probate.
Generally speaking, if property is owned in a trust, that’s good news for everyone. Real estate that is properly titled in a trust is not subject to probate and may immediately be put on the market and sold, without filing anything with a court and in most cases without consulting an attorney. Realtors should ask to see a document called the Certification of Trust, which is a summary of the trust that contains all the information the realtor and the title company will need to properly structure the closing documents. Realtors on both sides of the transaction should use the Certification of Trust to verify that the sellers are the successor trustees with a vested right to sell the property and convey marketable title to a buyer. In some cases, the family member working with the realtor may be the spouse of the actual trustee or is named as an alternate successor trustee. Neither of these individuals can legally sign closing documents. An alternate successor trustee can only act if the acting trustee resigns or is otherwise unable to act.
When reviewing the PR, realtors may discover that the property to be sold is subject to probate. For example, if both spouses have passed without retitling their home in a trust, a probate will almost always be required. Even where only one spouse has passed, if the spouses owned the property as tenants in common instead of joint tenants with rights of survivorship, a probate will almost certainly be required before the deceased spouse/tenant in common’s ownership rights in the property can be legally conveyed to a buyer. Realtors representing buyers and sellers of real estate that is subject to probate can add so much value for their clients if they understand these basic concepts. Clients involved in transactions involving probate will need help to anticipate and endure the additional time required for the closing to occur. In our experience, it takes anywhere from 15 to 60 days for a probate court to appoint a personal representative and sign the documents that allow for a closing to take place. These documents are called letters testamentary or letters of administration and must be signed by the court and provided to the title company before closing can occur.
Unfortunately, there are occasions when probate can derail a transaction completely. If the probate is contested, either because of a family dispute or a creditor claim, the court battle could drag on for months or even years. These cases are miserable for the parties trying to sell the property, cause for great stress and anxiety for buyers eager to close and move in and a source of major consternation for the realtors representing the parties.
On the other hand, probate lawyers love these cases because they can bill the clients hourly, at rates ranging from $200-$400+ per hour, racking up legal fees in the tens and hundreds of thousands of dollars. For these reasons, realtors should always encourage their property-owner clients to seek out the assistance of an experienced estate planning attorney to prepare quality trusts and carefully retitle real estate in trust so that the death of an owner does not result in a protracted and expensive legal battle. Usually clients pay flat fees for this type of estate planning work and at a fraction of the cost of a messy probate case.
(1) carefully review the PR and do not hesitate to pick up the phone and call your title escrow officer to discuss potential trust or probate issues;
(2) ask good questions, listen carefully and then ask follow-up questions of your clients on both sides of the transaction to gain a more complete understanding of the situation; and
(3) help manage your clients’ expectations when the prior owners of the property for sale are deceased. Following these simple steps will make you a more helpful, more effective and more profitable realtor.
Thanks to Michael Haslam and Nathan Croxford, Estate Planning attorneys, for their insight. Mike and Nathan help families in Farmington, Ogden, Layton, Bountiful and surrounding Utah areas create estate plans and elder law plans to protect their families and assets. Visit www.voyantlegal.com for more info.
WHAT ESTATE PLANNING ATTORNEYS WANT REALTORS TO KNOW
By: Nathan Croxford, Esq., and Michael S. Haslam, Esq. – Voyant Legal PLLC
*Opinions expressed in this article are those of the author and do not represent those of the Northern Wasatch Association of REALTORS® (NWAOR). This should not be construed as legal advice from NWAOR.