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- On November 28, 2016
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- Bergen, Bergen County Probate Court, Bergen County Surrogate Court, Essex, Essex County Probate Court, Essex County Surrogate Court, estate administration, Estate Property, Executor, Executrix, Hunter, Morris county probate court, Morris County Surrogate Court
Homes or estate properties are often the largest single asset in any estate. As executor, should you handle an estate property via a realtor or just cash out?
The circumstances of the estate you are administering are probably the biggest factor in answering this question. The size of the estate, its assets, and the complexities of the matter largely determine how much time and money you spend managing the property of an estate.
As executor, you have a fiduciary duty to obtain a fair market value for the assets of the deceased. A home is not only real estate, but contains personal property that must be inventoried, dispersed according to the Will, or sold as part of an estate sale.
We talked earlier about estate sales, but what about the real property—the estate property itself?
A walk-through about managing an estate property
Your duties as an executor include processing the house as an asset to the estate, or to beneficiaries.
In some instances, there is a beneficiary or family member who would like to own the property, reside in, or rent it. Under other circumstances, the home represents locked-up value that can only be realized by preparing the property for sale, or selling it outright for cash.
Holding on to a home during the probate process can take time. During that time, real property requires financial and physical upkeep including:
- Payment of ongoing expenses, including mortgage and taxes
- Possible costs of a property management firm
- Ongoing utility bills to keep lights on and water running
- Upkeep like physical maintenance of small items, or improvements and renovations to ready the house for sale like new flooring, septic, tree removal, windows, roof, or plumbing
- The expense of insuring a vacant property can be more expensive, given the higher likelihood of theft or vandalism
- Potential buyers of a vacant home may approach the property with a “short sale” attitude, arguing for repairs and credits on costs
- Realtors often charge more than five percent commission on a traditional sale
These outlays add up over time, especially when housing in the area is not moving fast. When the housing market slows, or the area is not in a prime location, property maintenance costs add up.
Cash offers for an estate property
Another option for handling probate property is seeking a cash offer from a reputable agency, realtor, or other buyer. In a cash-out arrangement, the executor works to gain fair market value from a buyer willing to offer cash outright.
With an offer in hand, the executor approaches beneficiaries for approval of the sale price. Upon approval, the house is sold and distributions to beneficiaries are made quickly, without the longer term costs of maintaining and renovating a house to enter the traditional sales process.
Advantages of a cash sale include:
- Less or no cost to stage a house for sale
- Speed and convenience of transaction
- No long term expense or tax liability for maintaining the home
The downside to a cash-out transaction is the possibility that the cash value offer is lower than what might be expected by beneficiaries if the house were to sell through an experienced realtor.
While this is sometimes the case, carefully weigh the true costs of property management against what realistically can be expected from a property—especially if the home is older and in need of larger repairs.
As with the disposal of personal property, beneficiaries often expect a higher home sale price than is realistic—or feasible. Your job as executor is to seek the best possible price for the property given its condition, the circumstances of the estate, and the wishes of the beneficiaries.
Decisions involving the disposal of estate assets, like a home, are important. When you have questions about the issues related to your role as an executor in New Jersey, contact us. We can help.