The Ins and Outs of a Successful Estate Sale
Part I: Issues Impacting Who Has the Authority to Legally Sell Property
By Rory S. Clark, Esq., Associate Real Estate Broker - Village Office
Mary S. Croly, Esq., Of Counsel, McLaughlin & Stern, LLP
This series of articles will demystify the process of a successful residential estate sale, walking through the legal and real-life issues that a family will encounter along the way and how best to navigate such issues. Critical to an estate sale is hiring a highly qualified team consisting of a trusts and estates attorney, a residential real estate attorney and a real estate broker in order to advise how to best tackle the challenges and achieve the best possible result for a family recently mourning the loss of a loved one. The fundamental component to an estate is determining from the onset who the authorized party is to sell the property. There may be many family members and/or friends that come forward, but before anyone can hire a real estate broker to properly sell the property, the legal process must take place.
When an owner dies, the family must figure out whether the property in such owner’s name is classified as a probate asset or a non-probate asset. Probate assets are defined as assets in the decedent’s name alone which are required to be collected by a court appointed fiduciary and distributed pursuant to the terms of a will or the intestacy law of the decedent’s domicile.
The fiduciary, whether it be an executor or administrator, would have the authority to sell the property, with certain exceptions, on such terms as in the opinion of the fiduciary will be most advantageous to those interested therein A thorough review of the will would have to be done to determine whether the property is specifically devised to a named beneficiary, in such case, the fiduciary does not have the power to sell.
In New York City, with the majority of residential real estate inventory for sale Cooperatives, the beneficiary would have to go through the same Cooperative Board approval process that a buyer would be required to go through to become the new owner. The Board of the cooperative housing corporation would issue a new stock certificate/ proprietary lease in the name of the new owner/beneficiary.
The marching orders for the real estate broker to begin their market analysis and pre-marketing preparation can’t formally begin until the New York Surrogate’s Court issues letters testamentary to an executor and letters of administration to an administrator, in both cases authorizing the fiduciary to collect and sell property.
Non-probate assets are not collected or sold by a court appointed fiduciary, but rather the surviving joint tenant has the power to collect or sell the property as its new owner. Real or cooperative personal property held in joint names either as joint tenants with rights of survivorship (JTWROS) or tenants-by-the-entirety are classified as non-probate assets.
These joint assets pass by operation of law or death directly to the surviving joint tenant. No court appointed fiduciary is required to transfer the ownership of non-probate assets, making the road to marketing and selling the property often quicker than probate assets. Non-probate assets pass by operation of law or death to surviving joint tenant, the designated beneficiary or pursuant to the terms of a trust agreement.
Choosing the Right Real Estate Broker to Market the Estate Property
Now that the family has determined who is in charge of legally disposing of the property, the real estate brokers can be interviewed to determine who is best to market and sell the property.
There are several key components that should be discussed with the real estate broker; the condition of the property, the preparation of the property to be shown to prospective buyers, the experience and marketing plan put together by the real estate broker and who will be the liaison for the real estate broker to communicate the forgoing.
Often times, estate sales bring the challenge of an outdated apartment that requires extensive renovations, which can either be done by the estate if there is money to cover such costs, or the pricing of the property must take the condition into consideration and be considered sold “as is.” Market conditions can often dictate the best way to handle this issue, and in the current wave of low inventory and high demand, renovating may not be as critical is it may have been in the post-Lehman Brothers real estate decline. While many buyers prefer to renovate to their own taste, getting them in the door can be the hardest part. If the apartment is not renovated, the apartment must be cleaned and prepped for marketing, including removing items of value and a new coat of paint may go a long way in freshening up the apartment.
The marketing plan put together by the broker must account for creative ways to market the property. While HD pictures and HD Videos are essential in a world where over 90% of buyers start their search online, can the broker provide staging recommendations, or at a minimum virtual staging options and alternative floor plans to feed buyers the creative juices to see the potential.
Some buildings in New York City have brokers who tend to do consistent business in a certain building, but have they done an estate sale before? Are they Members of the Real Estate Board of New York, which requires members to co-broke their listings with all other members, thus increasing the pool of potential buyers.
Last, while there is a fiduciary in place, there are often many voices that have an interest in the outcome of the sale, making it vital to understand who will be handling communications with the real estate broker and to the interested family and friends to make sure everyone is one the same page and to avoid potential legal delays by parties that feel they are not being properly represented.
The liaison between the attorneys and real estate broker working together as a collaborative team is always crucial in a real estate sale, but in an estate sale this collaboration is even more crucial with the additional steps necessary. Part II of “The Ins and Outs of a Successful Estate Sale” will continue with the process once an agreement is in place with a buyer and how to navigate the sales process, particularly in a Cooperative.
Thoughts and opinions presented in this post are those of Rory Clark and do not necessarily reflect the opinions of Halstead Property, LLC.