What happens when a property owner dies without a will, or the trustees must immediately sell an inherited home?
While it feels morbid to speculate about an unpleasant scenario, it is better to get in front of a probate sale than find yourself operating under pressure from grief, uncertainty, and a ticking clock.
Estate Assets: A System Working Against You
First, you will require a personal representative, aka a probate attorney to navigate the process. Anytime the courts are involved this is a guaranteed expense… and obviously not a cheap one. Of course, whenever these parties get involved you can expect a lengthy probate process to maintain full legal compliance. So right away, you have time and savings working against you.
This is where something curious happens. When folks are selling their primary residence they tend to agonize over every dollar and every minute; maximizing the outcome is paramount to their definition of a successful sale. Yet in a probate sale, these considerations are barely an afterthought.
Behavioral economic theory explains that it is easy to downplay these inefficiencies in our head since, after all, we perceive any sale value for a newly acquired asset as a positive outcome. (Reverse Endowment Effect causes humans to undervalue a new object less than one they have held or earned over a longer period of time). But this is a dangerous trap – if you are not careful you could find yourself pocketing very little cash after paying off every intermediary, creditor, inheritance taxes, and ultimately dividing the proceeds.
We may also feel lulled into a false sense of security when we hire a probate attorney. Everything (especially the hourly rates) feels very official, very professional. All the legal forms, jargon, and expertise can be overwhelming. They have masterfully explained the details of any life insurance policies. They have touted their ability to provide legal advice. It is easy to assume that the pros have everything covered; that someone who has more knowledge than you will see the sale through successfully. That is not the truth. Not with a probate attorney.
There are two important factors to consider when hiring a probate attorney. First, their expertise is solely in the area of the legal process of estate law. Their training and skills in that area do not imply any type of mastery of the real estate market. The nuances of actually selling a home is not where they thrive, so it would be foolish to expect their abilities to translate into an optimal sale. Second, the compensation for probate lawyers is not aligned with yours. While you can hopefully give your probate lawyer the benefit of the doubt they are not intentionally leading your probate sale on a boondoggle, a long probate process would be the most lucrative experience for them. A representative that is paid hourly will not fight tooth and nail to make certain your home sells on the terms that suit the seller best.
Probate Attorneys: More Complexities to Navigate
There are some additional idiosyncrasies of probate sales that can make the probate process even trickier. Because the plan is to liquidate as quickly as possible, rarely are estate property improvements made. This can not only impact the final sale value, but the marketing of the home, and introduce issues into the requisite inspections. Also, most state have probate law that requires a buyer to submit a deposit, then allows additional buyers to submit offers during that period. (Due to variance in state laws, there is uniform probate code to follow). Finally, the probate court ultimately has final approval over any sale. It is estimated that the probate costs alone can range from 3% to 7% of the estate’s value. That covers representative fees, probate court fees, publication of notice fees, accounting fees, appraisal fees, and recording fees for deeds. Nowhere does that actually cover maximizing the actual property sale!
With all of these complexities, you cannot afford to waste another dollar in the process. You cannot afford to even risk wasting another dollar. That’s why we built TrueParity with some distinct advantages in a probate sale:
- Ability to compare agents that specialize in probate (or other types of) listings
- Clear sale terms from prospective agents before they get your listing
- Potential services bundling and a robust knowledge library to maximize seller savings
The inherent costs and timeline of a probate sale (and probate law) often work against sellers; a platform that introduces transparency and optimizes value is the best help you can get during a difficult time.
Like this article? Curious what others’ experiences have been with probate sales? Share this with your friends about to hire a probate lawyer.
