Selling estate property

Selling the deceased's home is usually the longest and most emotionally loaded part of an administration, and there are several things to establish before listing it.

Establishing authority

The first question: does the executor have power to sell?

Some wills grant express authority to sell real property, which makes matters straightforward.

Where they do not, state law determines whether court approval is required. Some jurisdictions permit sale under independent administration; others require a petition, notice to beneficiaries and a court order.

Some require confirmation of the sale price, occasionally with a procedure permitting overbids at a hearing.

Selling without proper authority creates title problems that surface at closing, so this should be confirmed before marketing begins.

Where property passed outside probate — by survivorship, by trust, or under a transfer-on-death deed — the new owner sells it directly and none of this applies.

Before listing

Obtain an appraisal as at the date of death.

This establishes basis, supports the inventory, and provides a defence against any later suggestion that the property was sold too cheaply.

Check the insurance. Standard policies frequently limit or exclude coverage on vacant property, and the insurer must be notified.

An uninsured loss during administration is a serious problem for an executor.

Secure and maintain it. Locks, heating in winter, lawn care, and periodic checks.

Deal with the contents before listing, or at least before viewings.

Check the title for liens, easements, unpaid taxes and any recorded claims.

Establish whether anyone is occupying it, and on what basis, since a family member in residence complicates matters considerably.

The tax position

Generally favourable and worth understanding.

The property receives a basis adjustment to date-of-death value, which means a sale shortly afterwards produces little or no gain.

Where the sale price is below the appraised value, a loss may be deductible in some circumstances, particularly where the property was not used personally by the beneficiaries.

Selling expenses are generally deductible against the proceeds.

Where the property is held for a period before sale and appreciates, the gain from the date of death is taxable.

An estate holding property that generates rent has income to report, which may require an estate income tax return.

The beneficiary who wants to keep it

A recurring situation.

Where one beneficiary wishes to keep the property and others want their share in cash, the options are a purchase by that beneficiary at an independently appraised value, or a distribution in kind with an equalising adjustment from other assets.

What does not work is allowing occupation indefinitely while the others wait. That is a breach of impartiality and it produces the most common executor dispute.

Financing is generally the practical obstacle. A beneficiary buying out siblings usually needs a mortgage, and lenders treat estate purchases in specific ways.

Setting a deadline for arranging finance, agreed with all beneficiaries in advance, prevents indefinite delay.

Selling in a difficult market

Executors are not obliged to accept the first offer, and they are obliged to act reasonably.

Documenting the process — the appraisal, the marketing, the offers received, the reasoning for accepting one — protects against later criticism.

Where the market is poor, the alternatives are holding the property, which incurs carrying costs and delays the estate, or renting it, which introduces landlord obligations and income tax.

Both are legitimate and both should be discussed with beneficiaries rather than decided unilaterally.

The emotional dimension

Worth acknowledging because it affects the practical decisions.

The family home carries a great deal, and beneficiaries frequently object to a sale for reasons that are not about money.

Allowing time for family members to visit, to take photographs, and to collect what matters before the property is cleared costs little and prevents a great deal of resentment.

Rushing this is the most common avoidable cause of lasting family damage in an administration.

General information only, not legal or tax advice. Authority requirements vary by state — consult a qualified attorney before selling estate property.