Selling Real Estate After The Death of a Loved One: Things You Need to Know

Selling real estate of a deceased loved one

After the death of a loved one, such as a parent, there are a variety of tasks that must be handled to wrap up your loved one’s final affairs. Selling real estate that belonged to your deceased loved one is one of the more daunting ones. But before you call a real estate agent, you should take some time to get familiar with and consider a few of the key issues as you work through this process.

Who Owns the Property?

The first task is to understand who is, in fact, the legal owner of the property. Families are surprised to learn that their family member was not the legal owner of the house where the relative had lived for years. Perhaps the family member was renting all along or owned the home jointly with another relative or a friend.

When you start going down the road of selling real estate, how do you find out whether your loved one was the actual owner? You must locate and examine the last vesting deed for that property. “Vesting” means that the ownership has become genuine and legal. The deed (the legal document that creates ownership of the property) contains the information needed to determine ownership of the land or real property. When someone takes title to property, the previous owner signs a deed. Then the deed is recorded with the local government office, often called the recorder. In Maryland the office is called Land Records (each county and Baltimore City has a Land Records Office). In the District of Columbia, the office is called the Recorder of Deed. These offices maintain the record of land ownership in each jurisdiction. In most cases, a deed must be recorded before the land will vest in the new owner. If you cannot find a copy of the recorded deed among your loved one’s important papers, you may need to go to the city or county recorder’s office, a title company, or an attorney with experience in real property transactions to get help searching for the deed in the property records and determining whether your loved one owned the property.

Once you have located the recorded deed, you will see the type of legal ownership. Each type of ownership has different legal implications, so understanding the differences is crucial, and you should get help where you need it to take the necessary steps to sell or transfer ownership of the property.

Type of Ownership	What to Look For in the Deed (Who Is the Grantee?)	Possible Next Steps
Owned by a trust	“Jane Doe, Trustee of the Jane Doe Living Trust dated MM/DD/YYYY” or “The John and Jane Doe Living Trust U/A. (Month, Day, Year)”	Locate the associated trust documentation and determine who is the successor trustee if Jane Doe is now deceased.
Individually owned	“John Doe” or “John Doe, a single man”	Depending on the state where the property is located, probate may be required to appoint a personal representative, executor, or administrator who can sell or transfer the land. In Maryland and the District of Columbia ,probate is required to appoint a personal representative to administer the estate of the decease.
Joint tenancy with right of survivorship	“Jane Doe and Alice Brown, as joint tenants with rights of survivorship” or “John Doe and Jane Doe, as husband and wife”* or “John Doe and Jane Doe, as joint tenants” *In many states, listing a couple on the deed as being married indicates a default form of joint ownership, often joint tenancy with right of survivorship or tenancy by the entirety. This varies by state.	Probate will probably not be necessary if the co-owner is living. Full ownership of the land automatically passes by law to the surviving joint tenant. Heirs of the deceased, or the beneficiaries of a will or trust, will not inherit any interest in land so titled. The county recorder may require an affidavit of surviving joint tenant, along with a death certificate, to allow the land to be sold or transferred after the death of the first joint tenant.
Tenancy in common	“Alice Brown, James Cooper, and Andy Katz, as tenants in common” or “Alice Brown, James Cooper, and Andy Katz, as joint tenants”* *In many states, if unmarried individuals own property as “joint tenants” without any additional language, it is assumed that the intent was for it to be owned as tenancy in common.	The family of the deceased tenant in common will probably need to file a probate case for a personal representative, executor, or administrator to be appointed by the court to sell or transfer the deceased’s interest in the land according to state law or the deceased’s will. If one of the tenants in common is a trust, probate would likely not be required for the transfer of that interest.
Tenancy by the entirety	“John Doe and Jane Doe, tenants by the entirety” or “John Doe and Jane Doe, husband and wife”* *In some states, title to real property held by a married couple is automatically held as tenants by the entirety.	This option is available only to married couples in some states. The surviving spouse automatically becomes full owner of the property upon the death of the other spouse. No probate will be required. The survivor may need to record a new deed or an affidavit of surviving tenant before the survivor can sell or otherwise transfer the property.
Community property	“John Doe and Jane Doe, husband and wife, as community property” or “John Doe and Jane Doe, husband and wife”* or “Jane Doe, a married woman”* *If this language appears and the property is located in a community property state, there is a strong presumption that the property was intended to be owned as community property.	Usually, the surviving spouse of the deceased automatically inherits the deceased spouse’s interest in the property unless it was otherwise disposed of by the deceased spouse’s will or trust, so probate may not be necessary, but you may need to obtain a court order to transfer title to the spouse.
Miscellaneous	If you see other language that doesn’t quite fit any of the above examples, be aware that there are other forms of ownership such as life estates or tenancy in partnership that may use different wording and that can lead to a wide variety of legal results.	Contact an attorney, a title company, or other knowledgeable real estate professional to help you determine what your next steps should be.

Appraising the Property Before Selling Real Estate

It is a good idea to have the property appraised as soon as possible after your loved one’s death. An appraisal is beneficial for a variety of reasons:

If you’re selling real estate to a family member or a friend, or even if you choose to purchase the property yourself, a professional appraisal will protect you as the trustee, personal representative, or executor should other heirs and beneficiaries claim that you sold the property in a self-dealing manner for less than full market value.
If you sell to an unrelated third-party purchaser, an appraisal will help you determine whether you are getting a fair price for the real estate and protect you from accepting low-ball offers. It will also protect you as the trustee, personal representative, or executor from claims that you are not acting in the best interests of the beneficiaries.
If your loved one’s estate could be subject to estate taxes, an appraisal will help you verify the value of the estate for tax purposes.
If you intend to sell the property later, an appraisal will help you determine the new tax basis of the property, established upon the death of the previous owner, so you can accurately calculate the capital gain or loss when you ultimately sell the property.
Documenting the proper value of the property can also help with obtaining insurance sufficient to cover any damage to the property while you are administering your loved one’s estate or trust.

Maintaining the Property

When you are handling the final affairs of a loved one, properly maintaining the property until it is ready to be sold is another important task. For instance, you must determine if the property still has a mortgage against it and whether there are sufficient funds in the estate or trust to continue making mortgage payments. If not, you could risk foreclosure, which can exponentially complicate your job. If funds are available, you should ensure that timely payments continue to be made.

In addition to maintaining any mortgage payments, you should also make sure that the property taxes and any other necessary payments such as water, electricity, natural gas, yard maintenance, security system, etc., are paid in a timely manner as you go through the process of selling real estate. With respect to phone, internet, and cable bills, you should determine whether those are necessary. Certain alarm systems require a phone line or internet connection to function properly.

A Seller’s Required Disclosures

Once you have fully engaged in selling real estate and listed the property for sale, you must be sure that you know what disclosures about the property the applicable laws and regulations require. In some states, you are required to disclose a variety of property conditions to potential buyers. Failing to do so can expose you to significant liability and even litigation in some cases. Some of the more common disclosures you should be aware of include

asbestos, mold, water damage, or lead;
mechanical or electrical problems or issues;
structural problems;
hauntings or deaths that occurred in the home, including natural deaths, murders, or suicides;
boundary disputes;
environmental and natural hazards, such as high radon levels, contaminated soil, electrical hazards, high water tables leading to frequent flooding, etc.; and
drug-related hazards, e.g., meth labs.

Check with your real estate agent or attorney to determine what disclosures are required under state law.

Selling real estate that belonged to your loved one does not have to be overly complicated, and it can often be done very quickly and efficiently. Now that you are armed with the above information, you will be far better prepared to handle this important aspect of your loved one’s final affairs. If you need help, at McDonald Law Firm, we welcome the opportunity to visit with you about your specific needs. Andre O. McDonald, a knowledgeable Howard County, Montgomery County and District of Columbia estate planning, special-needs planning, veterans pension planning and Medicaid planning attorney, at (443) 741-1088; (301) 941-7809 or (202) 640-2133 to schedule a consultation today.

DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL OR TAX ADVICE.