Monday, January 23, 2012

Attention Realtors and Heirs– The probate process could derail your sale!

The scenario - A client lists a property with you that was owned by a decedent who did not have a trust, but your client fails to tell you that that they have not opened probate on the estate.   You have a buyer for the property, escrow is scheduled to close in 45 days, and then underwriting tells you that the client has no authority to sell the property.

What next?  Generally, it will take at least 4-5 weeks after filing the Petition for Probate with the court before the first hearing will be scheduled.  If all goes as planned (there are often issues that arise that will prolong the process) the personal representative will receive Letters Testamentary at that hearing, which gives them the authority to sell the property.
The next step is to file a Notice of Proposed Action, noticing the court and all beneficiaries with the details of the sale.  A fifteen day notice period is required before the sale can be completed. 
This entire process can take up to 8 weeks to complete, which means your 45 day escrow is blown and the possibility of losing the buyer becomes a very real issue.
You can ask the Court to grant a Special Administration, issue letters with limited authority to the petitioner, allowing the sale to proceed.  Generally, a Special Administration is requested for urgent matters.  In this instance, you can claim preservation of the estate as the reason for the court to grant the Special Administration. The court could rule that the failure to open a probate before listing the property does not rise to the required level of “urgency’ for a Special Administration. 
When listing a house belonging to a deceased person, always determine if the house is titled to a trust or if a probate must be opened before the house can be sold.   You will save yourself and your client from experiencing the delay of probate at a time when you cannot afford such a delay; not to mention the added expense of filing a Special Administration petition in addition to the standard Probate petition. Better yet, recommend anyone purchasing a home create a trust which, if drafted correctly, will allow for avoidance of the probate process all together.

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