19 Nov Understanding The Escrow Implications of a Probate Sale
A probate sale is defined as the sale of a property where the owner is deceased and the sale is being conduced by the deceased estate. An Administrator or Executor signs on behalf of the deceased person with either full or limited authority. Sometimes the deceased has a will. Sometimes they don’t. Although the escrow process is fairly similar for both scenarios, the time frames associated with the two situations can vary dramatically. Understanding the core differences between the two can assist agents and clients in successfully closing a transaction.
Situation #1 – The Deceased Left a Will:
From the standpoint of escrow and most buyers, this situation is a far preferable probate sale due to the predictable time frames this situation provides. When the deceased leaves a will, the property falls under the Independent Testamentary Act and the court designates an Administrator or Executor of with full authority over the estate. Typically this person will be a close remaining relative. It then becomes the responsibility of this person to decide the future of the property. Because this person has full authority, the process from an escrow perspective is very similar to that of a standard sale. However, there is one additional document that will be required by title in order to close the transaction. They will need certified copy of the “Decree of Distribution of Letters of Testamentary”. This is official paperwork issued by the court that designates the Administrator of Executor and is required by title in order to insure the transfer of the property. CV Escrow also will want to receive a copy of this document in order to proactively review it for potential hiccups in the transaction.
Situation #2 – The Deceased Did Not Leave a Will:
In the event that the deceased did not leave a will, the property sale will have to go through the court probate process. The court will approve and assign an Executor or Administrator for the Estate of the Deceased. This Executor will be an independent court representative. The court will also issue an Order Confirming Sale which basically stating that the listing price is at fair market value and it authorizes the sale of the property. A certified copy of this document will be required by title in order to close the transaction.
The challenge for escrows on Probate Sale listings in this situation where the deceased did not leave a will is that the time frame for the court probate process can vary from 60 days to 6 months or beyond. This creates a challenge in negotiating escrow times. Agents should be prepared to properly set buyer expectations about the time it can take to close a court appointed probate sale. It is not uncommon to require an extension of escrow. And, unfortunately, sometimes the extended escrow duration can become a deal breaker.
If you are ever in a probate property sale transaction, understanding the process and what you must do to transfer the property can affect the success you have in closing the deal. Your escrow officer can be an excellent resource to inform you of the paperwork and time frames that will be required to complete the transaction. In addition, consulting your family attorney or estate planner is your best course for answering specific and legal questions in these types of transactions.
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