Probate is a process most people are not familiar with. Even the term “Personal Representative” has to be googled by the person who gets the assignation, and that is just the beginning. Everything that probate involves is so foreign, the legal language that the attorneys use, the role of estate sale companies, cleaning crews, public records, heirs, creditors, selling a home, etc.
It could be overwhelming to go through the process of collecting all the financial information of the deceased person, put the probate process together on the hands of an attorney and meet the deadlines required by the court in order to receive an inheritance. During this time, the person representing the estate is bombarded with letters from investors promising to buy their home cash and pay for all the closing cost, real estate agents promising to deliver the best result you could hope for, heirs following up on the status of the probate process and asking when they will receive their inheritance, everybody is pushing, pushing, pushing… The personal representative has to juggle everybody around him who is waiting for a decision and it is then when he could start making mistakes. But, which are the most common mistakes personal representatives make?
MISTAKE #1: Believing that Listing a Home with a realtor will take much longer to sell than just selling it to an investor.
A personal representative could think that listing the home with a real estate agent could take too long to finish the sale and receive the money, but is this true?
First of all, as soon as the personal representative is appointed by the judge, the home can be listed for sale. The 90 day period for creditors to place claims and get paid starts here and nobody will be able to touch the money coming from the sale …. unless the home was the primary residence of the deceased person and it was homestead. If that is the case, no claims can be made against the home, except by the bank that holds the mortgage. The money coming from the sale can be divided between the heirs right away.
When the home is listed with a realtor, if the home is priced correctly and offer should be received in less than 30 days. Many of the offers for probate homes are cash but if that is not the case it takes an average of 30 days for the sale to close. Selling the home with a real estate agent will make the home sell for top value and all the process should be finished in maximum 60 days from start to finish.
On the other hand, when an investor buys a probate home the seller will sell for 50% to 75% of market value, which means that the heirs will lose between 25% to 50% of the money they could have made if the home had been sold with an agent. Besides the loss of equity, just because it is cash does not mean that the sale will close in two weeks. It could take one month to close the sale.
In conclusion, if your realtor knows what he is doing the house should sell quickly and you will profit much more money in your pocket at the end of the day.
MISTAKE #2: Thinking that Probate has to be finished before the home could be sold.
As I mentioned before, as soon as you are appointed as the personal representative, the home can be listed for sale. If the house was not the primary residence of the deceased person and the sale closes before the 90 day period for creditors to place claims finishes, the money coming from the sale could be put by your probate attorney in an escrow account until all the creditors get paid. The rest of the money will be divided between the heirs of the estate.
If the house was the primary residence of the deceased person and it was a homestead, no claims can be placed against it, except by the bank holding the mortgage. In this case, as soon as the sale closes the bank gets paid and the rest of the money is divided among the heirs. This could happen even before probate is finished.
MISTAKE #3: Overpricing the House.
When it is time to sell a home, everybody becomes an expert on the market and in pricing a home for sale. Relatives living in other estates different than where the home is located claim to know about real estate. They asked their attorney, their friend who is a realtor, their cousins … you name it, but they also looked at the value of the home in Zillow and they want to get that value for the house. At the end of the day, all a realtor can do is give you a recommendation, but the house is yours. If you want to overprice your home, do it, it won’t sale and the longer it stays on the market without selling, the least you will get it. But that is not the only problem, you will have to pay for all the maintenance and repairs the house needs while it is still in the state and the title has not been transferred.
Everybody wants to sell their home for the maximum price they could, but the market will not pay more than fair market value, price your home accordingly.
Mistakes could be costly. Receiving an inheritance could be something that could happen to you just once in your lifetime. Avoid making costly mistakes and you will profit more money in your pocket.