Why do heirs suddenly need to sell probate real estate? We see cases where years, even generations, have elapsed since the real estate owner has died, and nothing has been done. So why, all of a sudden, do the heirs seek a lawyer or professional executor? Here are the top 5 reasons we’ve seen.
1. Bad economies mean heirs need money
When there’s a recession, our office gets busier. It seems that when times are tough, people want large, lump sums of cash (rather than a theoretical portion of an estate).
It’s a bit counter-intuitive, since real estate prices are often down at these times and heirs would have to sell low. The heirs figure that even though the sale price is lower than in a strong economy, at least they’ll get some cash.
2. More deaths means more complications
As more and more family members pass, heirs see how increasingly complicated probate will be.
For example, mom died and left the house and 4 kids who all get along. The 4 kids don’t probate, but agree amongst themselves who will perform upkeep, who will collect rent, and how the rent will be divided. But then the kid in charge of upkeep dies and now no one is officially in charge of upkeep. Then the one in charge of making sure there is a tenant also dies, so his kids move in. Now there is tension among the family members who don’t all agree with the arrangement. You may not think your family will have these problems, but when money is involved, it can get messy.
Once the original heirs start passing and those who were not part of the initial arrangement get involved, problems can snowball quickly. At this point, it is just easier to sell the real estate before it gets more complicated.
3. Tenant problems
For example, grandma owned a rental property and for years after grandma’s death, tenants paid like clockwork. But for whatever reason the tenants stop paying. It happens all the time. It’s easy to stop paying rent and stay in the house when no one is enforcing payments. The heirs will find that they can’t take legal action until they start probate and get a court-appointed executor.
Sometimes the tenants learn that no one is legally in charge yet, and that’s why they stop paying. It could be at least a year before an executor is appointed by the court. So, there’s at least a year rent-free. As a side note, often these non-paying tenants are also heirs. Oh, the humanity!
4. Creditor, co-op demands, no longer self-sustaining
Sometimes heirs miss or ignore bills, then the creditors eventually get active. Just imagine an heir being diligent about paying all of the bills, but totally forgot about the water bill. Rather than the company shutting off the water, there is a giant outstanding bill after a decade. Sometimes an estate debt is so large that there is no choice but to sell the real estate.
Or sometimes a co-op board looks the other way for a while, but now wants things done correctly and the estate needs to be probated.
Maybe the rent used to be enough to cover all bills, but as time elapsed it’s not quite enough anymore. Maybe you didn’t raise the rent enough, or inflation caused your expenses to skyrocket. Now you have real estate that is generating a loss.
5. Property damage or disrepair
A major storm may cause costly damage. Other problems that tend to emerge when the property is not owner-occupied could be mold, old/leaky roof, or floor/foundation problems.
Maybe none of the heirs have the funds to fix these major problems to bring the home up to rentable status. If there are no other funds and the heirs don’t want to deal with it, then maybe it’s time to sell.
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