When someone dies who owns real estate, what happens to the property? And who gets to decide?
First of all, it depends on whether the decedent had a will. It also depends on whether the will, if one exists, grants a designated personal representative the power to sell or transfer real property.
If there’s no will, then the process gets even more complicated. But it’s essential to understand how probate—a judicial process of evaluating and distributing assets following a person’s death—may impact the sale, and what, if any steps, you need to take before the closing date.
For the sake of this discussion, let’s assume that the question of selling the decedent’s property is going through probate and that the Court has appointed a personal representative (either the individual identified in the will or one designated by the Court in absence of a will). The term ‘court approval’ here refers only to the sale of real estate and not to the probate process as a whole.
When Is Court Approval Needed to Sell Real Estate?
In general, when the will specifically grants a personal representative the authority to sell or transfer real property, then court approval is not required. This is sometimes known as a sale “pursuant to power of sale contained in the will.” The power of sale language is often included in the deed conveying the property, in order to establish the personal representative’s authority to sell it.
That’s the simple case. However, if the decedent had no will (died intestate), or the will was silent on the disposition of real estate, then court approval is necessary. The personal representative needs a ‘license to sell’ in the form of a court ‘decree’ to sell the property. He or she must file a Petition for Sale of Real Estate with the Court, requesting that approval.
Two types of petitions may be filed, depending on timing. If the petitioner files the request within a year of the Court’s approval of the personal representative’s bond, then she or he would file a standard Petition for Sale. Filing a petition after a year has passed requires a Petition to Sell for Debts and Expenses. More on that, below. In both cases, the petition must include an Inventory of the Assets of the Estate, a release of Estate Tax Liens, a copy of the purchase and sale agreement, and a description of the property being sold.
Requirements for a Standard Petition for Sale of Real Estate
In this case, the petitioner provides the Court with basic information about the estate, the personal representative, the property being sold, and the purchase price. You can obtain a form from the Probate Court along with a checklist of additional required documents. Once everything is completed and signed, you file the petition with the Court for review and approval.
If all interested parties agree with the sale, then you should submit Assent and Waiver forms for each interested party. If there is a disagreement, then the Court will issue a citation sent to all involved that sets a time frame (typically 30 days) within which any interested party may object to the proposed sale. That’s why, to save unnecessary delays in the sale of the property, it’s essential to file assents if all are in agreement.
Once the court approves the petition, a decree is issued. The decree document may get recorded at the time of closing or may be referenced in the deed that conveys the property out of the estate.
Requirements for a Petition to Sell for Debts and Expenses
As the name implies, this kind of petition seeks to show the Court that the estate does not have sufficient funds to pay the estate’s debts and expenses, necessitating the sale of the real estate. More financial information is required, including an accounting of the estate’s available funds, any specific distributions provided for in the will, and a listing of the specific debts and expenses. The cost of the estate administration, including attorney’s fees and personal representative fees, are also listed as an expense to be paid by the estate. As with a Standard Petition, if all interested parties agree to the sale, filing their signed assents will avoid the issuance of a citation. Once all forms are completed and submitted, the Court will review. If the petition is approved, the Court will issue a decree allowing the sale.
Note that both petitions require a signed purchase and sale agreement. This means that you cannot get a license to sell in advance of signing the purchase and sale. Be transparent with the buyer regarding the need for court approval and the estimated time frame to complete the process. The license to sell is also specific to that purchase, so if the deal falls through while the petition is pending or if a decree has been issued, then a new license to sell or an amendment will be needed.
In short, to ensure a smooth process to obtain a license to sell, be prepared and have all the relevant property and financial information available. Our attorneys here at Mountain Dearborn will be pleased to answer any of your questions regarding a license to sell petition. Please contact us here.
Image: Redd Francisco
