The personal property should be distributed per the decedent’s will or by the Personal Representative. But sometimes, friends or relatives help themselves to personal possessions even though there was no authority to take any of the personal property – this can occur prior to the appointment of a PR. I highly recommend that the heirs/PR engage a professional early to facilitate the process.
Otherwise, the heirs should work together to distribute the personal property equitably - although this can be an extremely difficult task. Once all of the personal property has been distributed and there are items of value that remain, it is a good time to involve professionals to assist in the liquidation of the remaining assets. Often, there is little or no value of the remaining items. There are specialized businesses that can assist in this process.
Once the heirs/PR have the authority and decide to sell, hiring the right REALTOR/company is critically important and can help determine the best strategy. If the property is not in good condition or if it is not in financeable condition, thought must be given to whether or not estate funds will be used to make repairs or improvements. Often the PR is not authorized to expend estate funds for this purpose.
There are a few REALTORS/companies that specialize in selling estate homes and offer additional services. This type of company has special skills and a list of subcontractors that can make the life of a personal representative (or heirs) easier while maximizing the net proceeds.
They have relationships with auction, cleaning, staging and home improvement companies and subcontractors who can help sell the remaining personal property, make arrangements to gift what is not sold and remove the rest of the unwanted items and prepare the home for marketing. These experienced agents also often have experience in selling less than perfect homes and have the knowledge and skills to obtain maximum value. The professional real estate agent may suggest the list price for the home and whether or not to sell it improved or as-is, but it is the heirs/PR that ultimately make the these important decisions.
A qualified REALTOR may recommend certain improvements to the property prior to marketing to maximize net proceeds. Before authorizing any improvement, the PR needs to consider whether he or she is authorized to spend estate assets to make such improvements – usually they are not. According to Paul Brigham, “As counterintuitive as it may seem, a Personal Representative needs to remember that unless the will provides otherwise, they have nothing to do with the real estate.”
At a minimum, if the home is to be sold traditionally it will need to meet minimum financeable requirements (for an FHA loan the home must meet HUD’s minimum property standards for health and safety: no peeling paint, no loose handrails, all stairways must have handrails, working heating system, roof in good condition and no other safety issues). This strategy may or may not be the best way to proceed. Only after careful consideration, and consultation with an estate attorney should estate funds be used for this purpose.
Sometimes, it may be best to sell the property in as-is condition for several reasons: The PR may not have the authority to expend estate funds for improvements, even if they do - it may be too time consuming to engage the contractors, get the appropriate permits, get the work completed and signed off by the town and liquidate the property – there may be an urgency to convert the equity into cash to pay off other outstanding debt.
If the property is not in financeable condition it may be best to sell directly to a cash buyer or real estate investor. Benefits of selling as-is include: convert home to cash quickly, no oversight, no chance of spending more than you will get back on the upgrade/improvement. Other benefits may include, no real estate broker fee, no showings or signage, avoid stress of renegotiation after home inspection and no finance contingency or appraisals that come in below the agreed purchase price.
Personal representatives, heirs or trustees should be careful not to hold on to a property for too long. The risk for vandalism and other damage increases as a home remains vacant and Insurance companies don’t like to insure empty houses for extended periods – the insurance rates can spike after several months of vacancy.
The personal representative should maintain the homeowner’s insurance on the decedent’s house in case of a fire or accident. If the home is vacant, the PR also needs to beware of maintenance issues. If a pipe breaks, significant damage can be done before anyone discovers it which can happen more often than you think in the cold winter months in New England. Repairs can cost thousands of dollars and delay a property’s sale.
Assuming the PR has the Administrative power to deal with the real estate, the PR has a fiduciary responsibility to the heirs. If the property drops in value, during the time improvements are being made or as a result of any potential mistakes made by the PR, they are liable. None of the heirs/devisees will complain if things go well and the property is sold for more than what was expected but you can count on complaints, potential costs or litigation if the opposite is true.
According to Paul Brigham, “The duty of a PR in selling real property is to obtain the highest or most advantageous price for the property. The duty exists regardless of the terms of a binding agreement to sell.” If the estate proceeding is contested or the beneficiaries are simply difficult, it is prudent for a Personal Representative to avoid liability by seeking protection from the probate court through a license to sell.
Some of the potential issues as a Personal Representative need to be concerned about include: timing, lack of resources, possibility of reduction of value, water damage, lapse of insurance, property value depreciation and violation of fiduciary responsibility. To mitigate liability, selling sooner rather than later may be the best option. Other things a PR may be responsible for: paying taxes, mortgage, insurance, condo fees, utilities, yard maintenance, snow removal etc. It is probably a good idea to cancel or terminate unnecessary services (e.g., cell phone, landline, cable, etc.)
To help avoid tension and family disputes after death it is best to properly plan your estate. With a little planning you can leave a legacy that helps your loved ones carry out your wishes and make it easier and faster to sell your home after death. Part of this planning should include that heirs know where all the estate and other important documents (homeowner’s policy, life insurance, bank and investment account numbers) are located and they should also have a copy of them.
In an upcoming blog I will discuss how to sell real estate from an estate when proper estate planning has been performed and how to properly plan an estate. This article will include recommendations, costs and how to go about simplifying the process of selling real estate post death.
John Agostinelli is the co-author of Easy Money and the American Real Estate Ponzi Scheme, and is a recognized authority in real estate. John is a real estate investor, broker, industry consultant and housing policy commentator. His market focus is the Boston MetroWest area.
John services: Ashland, Dover, Framingham, Holliston, Hopkinton, Marlborough, Medfield, Medway, Milford, Millis, Natick, Northborough, Sherborn, Southborough, Sudbury, Wayland, Westborough, Upton
John has helped hundreds of investors, buyers and sellers, sell, purchase or invest in real estate in over 60 Massachusetts towns. Please contact him via email at firstname.lastname@example.org or by phone at 508-283-4958.
Other helpful articles/books worth reading: