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Can I Sell a House in Probate?
REAL PROPERTY IN PROBATE:
Making Sure You Have Marketable Title
Before we begin, let’s discuss the difference between legal title and marketable title. Legal title focuses on the legality of ownership, while marketable title emphasizes the marketability and absence of potential issues or disputes related to the property’s ownership history. While legal title is a minimum requirement for ownership, marketable title provides an added layer of assurance and desirability in real estate transactions. This is where the issues of probate law and real estate law intertwine.
There are two types of real property in the eyes of the Probate Court: A Decedent’s homestead property and a Decedent’s non-homestead property. Anything that is not homestead, is considered non-homestead; this includes a second home, investment property, and vacant land.
The distinction between homestead and non-homestead may not seem important, but understanding the difference between them and knowing the proper way to handle the properties in a probate setting is crucial to having marketable title. Without marketable title, you will not be able to get a mortgage on a property or sell it to a third party.
So, the question becomes, how do I make sure I have marketable title to a property in probate? Well, the answer changes based on whether the property is a homestead or not, and how the property will be transferred.
If the property was the Decedent’s homestead, you are required to file a Petition to Determine Homestead Status of Real Property and obtain an Order Determining Homestead Status. Without this Order, you will not have marketable title and will not be able to sell the property, mortgage it, obtain permits, etc. This Order is recorded in the Official Records and acts as your base title for the property.
For any non-homestead property, it depends on whether you intend to sell the property through the probate, or if it will just be distributed to the heirs or beneficiaries of the estate.
When selling non-homestead property through probate, one of two things is required. You either need to have a Will that gives the Personal Representative the power to sell real property, or you need an order from the Court authorizing the sale. If the Will does not include the specific power, or if there is no Will, you are required to obtain the Order. Once you have the Order, the Personal Representative will sign a Personal Representative’s Deed to convey the property to the third-party purchaser.
If you are not selling the property and just want to distribute it to the heirs or beneficiaries, you do not need an Order authorizing a sale from the Court. Instead, the Personal Representative signs a Release and Certificate of Distribution of Real Property recorded in the Official Records. The Release and Certificate of Distribution evidences that the property did not need to be sold to satisfy any creditors and is otherwise ready to be properly distributed. A Personal Representative’s Deed is not proper when distributing the property and will cause issues when it comes time to sell the property. In this circumstance, the Release and Certificate of Distribution serves as base title.
Many people, and even some probate attorneys, are not aware of these requirements and attempt to sell the property without obtaining the appropriate Order or Release. This causes issues and can delay a closing for several weeks, even if it is caught right away. This could cause you to lose your buyer if they are not willing to wait for the probate process to fix the title issue. What’s worse, if the problem is not spotted by a quality title agent at the time of sale, the issue could come back on the next transaction, potentially exposing the Personal Representative to personal liability.
For this reason, it is important to work with not only an experienced probate attorney, but also an experienced real estate attorney to ensure you receive marketable title the first time around. At the Legacy Legal Team, one of our greatest strengths is the size of our firm, and the fact that we have experienced attorneys in nearly every area of the law. We understand how probate and real property laws work together and would be happy to represent you regarding any of these issues.