Selling an Estate Property in Alabama: What Families Need to Know

 

 

Selling a home after someone dies is rarely just a real estate transaction.

There may be a will. There may not be a will. The house may still have a mortgage. One family member may have been living there. Someone else may have been paying the insurance and taxes. And before anyone even gets to the question of listing the property, there may be an entire house full of furniture, photographs, paperwork and belongings that have to be dealt with.

It can feel overwhelming very quickly.

The good news is that you don't have to understand the entire probate process before you make the first phone call. You simply need to get the right professionals involved early and begin answering a few important questions.

Recently, Judy and I sat down with our friends at Canopy Title to talk through some of the questions we hear most often from families preparing to sell estate property in Alabama. Here are some of the most important things to know.

First: Find Out Who Actually Owns the Property

Before worrying about paint colors, repairs or what the house might sell for, we need to determine who is vested in the property.

One of the first things we want to see is the deed.

Was the deceased person the sole owner? Was there another owner? Does the deed include a right of survivorship?

Those details can dramatically change what needs to happen next.

This is one reason an experienced real estate agent can be helpful very early in the process. We can begin working with the title company to research ownership and identify potential title issues while the family works with its attorney on the estate.

Do You Have to Probate the Estate?

That depends on the circumstances, but if probate is necessary, we strongly recommend getting advice from an Alabama probate attorney rather than trying to navigate the process based on what happened when your neighbor's aunt sold her house.

Estate situations are incredibly fact-specific.

One term you'll probably hear is testate versus intestate.

A testate estate means the deceased left a valid will that is admitted to probate. The estate is then administered according to that will, subject to Alabama law.

An intestate estate means there is no valid will directing how the estate should be distributed. In that situation, Alabama's laws of intestate succession determine the heirs.

That distinction matters when real estate is involved.

What If You Can't Find the Original Will?

This is something families sometimes discover only after they begin going through the deceased person's belongings.

If the original will cannot be located or established as valid, the estate may ultimately have to be administered as an intestate estate. This is an issue to discuss with the probate attorney as soon as possible.

There is another deadline families should know about: under Alabama law, a will generally must be offered for probate within five years of the person's death.

Waiting can create complications, so this is not something we'd recommend putting off indefinitely.

Can You Sell the House Before Probate Is Completely Finished?

Potentially, yes.

This surprises a lot of people.

You don't necessarily have to wait until every part of an estate has been settled before putting the property on the market or even selling it.

However, selling the property and distributing the money from the sale are two different things.

Alabama probate estates have a creditor period, and sale proceeds may need to remain in the estate until they can legally be distributed. The attorney handling the estate and the closing/title professionals can explain exactly how that applies to your particular situation.

From a real estate standpoint, we generally prefer to see the probate process underway before putting the house on the market. It gives us a much clearer picture of who has authority to sell and what will be required to get the transaction to closing.

What Documents Will You Need?

The exact paperwork depends on the estate.

For a testate estate, documents may include items such as:

• The death certificate

• The Last Will and Testament

• The petition to probate

• Letters Testamentary

• Other documentation required by the probate court, closing attorney or title company

An intestate estate can require different documentation to establish the legal heirs. Depending on the circumstances and how much time has passed since the owner's death, affidavits of heirship or an estate bond may also be required.

Don't panic if you don't have all of this sitting neatly in a folder.

Part of the process is figuring out what exists, what's missing and what needs to be obtained.

What If the Deed Is Still in the Deceased Owner's Name?

That's common.

Families sometimes assume they have to transfer the house into an heir's name before it can be sold. That isn't necessarily the case.

When an estate has the proper authority to sell, the conveyance can generally be made from the estate to the new buyer at closing.

Again, this is why we want the title company involved early instead of discovering a problem three days before closing.

What Happens If There's Still a Mortgage?

A mortgage doesn't disappear when the owner dies.

Payments need to be addressed while the property is being handled because a mortgaged property can still be subject to foreclosure if payments aren't made.

When the home sells, the outstanding mortgage is typically paid from the proceeds at closing, just as it would be in a traditional real estate sale.

Who Gets the Money When the House Sells?

That isn't determined by the real estate agent.

If there is a probated will, proceeds are ultimately distributed according to the estate plan and applicable law. If there is no will, Alabama's intestacy laws determine the heirs and their respective interests.

There can also be claims, liens, judgments, estate expenses and other obligations that have to be addressed before everyone receives a check.

This is one of those questions where your estate attorney, title professional and CPA are much better sources than Google—or your cousin who went through "basically the same thing" in Georgia seven years ago.

What If One Heir Has Been Paying the Mortgage, Taxes or Insurance?

Keep records.

If someone has personally paid legitimate estate expenses from their own funds, reimbursement may be possible through the estate.

Save statements, invoices, receipts and proof of payment and discuss them with the attorney or personal representative handling the estate.

Don't rely on everyone's memory six months later.

What If One Heir Has Been Living in the House?

Living in the property doesn't automatically give someone a greater ownership interest than the other heirs.

There can be important exceptions and additional rights involving a surviving spouse, and a will may contain specific provisions affecting the property.

This can also become an emotional issue for families, particularly when the person occupying the home doesn't want it sold.

Get professional advice early rather than allowing assumptions about ownership to harden into a family dispute.

What If One Heir Doesn't Want to Sell?

This depends heavily on the estate documents and how the property is owned.

In some estates, the executor may have authority under the will to sell property without obtaining every heir's permission, although heirs generally have rights to notice and may have the ability to challenge actions through the court.

If family members disagree about whether the property should be sold, involve the estate attorney before accepting an offer or making promises about what will happen.

What Do We Do With All the Stuff?

This may not be a title issue, but from our side of the table, it is one of the biggest issues families face.

Sometimes you're dealing with a completely furnished home filled with decades of belongings.

Start by identifying and securing important documents, financial records, photographs, jewelry, family heirlooms and anything specifically addressed in the will. Before disposing of estate property, make sure the personal representative or estate attorney has confirmed what can appropriately be removed, distributed, donated or sold.

Then you can make a plan for the rest.

Depending on the house and the family, that may mean an estate sale, auction company, donation service, junk removal company, moving company, storage facility or a combination of several.

You do not have to do all of this yourself.

We keep a list of local resources because we've seen how physically and emotionally exhausting cleaning out a family home can be.

And sometimes the smartest real estate decision is not to empty every room and renovate the entire house before selling it.

Should You Fix the House Up or Sell It As-Is?

There isn't one right answer.

We've sold estate properties where making a few strategic repairs produced a significant return for the family. We've also seen houses where spending months and thousands of dollars renovating would have made very little financial sense.

Before you start writing checks, we look at:

• The property's current condition

• Comparable sales

• What competing homes look like

• The likely buyer for the property

• The cost of the proposed work

• How much value that work is reasonably likely to add

• The family's timeline and priorities

Sometimes we recommend repairs.

Sometimes we recommend cleaning, clearing out what needs to go, pricing appropriately and selling the house exactly as it sits.

The goal isn't to make the house perfect. The goal is to make good financial decisions for the estate.

Will You Owe Taxes When You Sell an Inherited House?

Maybe, and this is where we hand the microphone to your CPA.

Inherited property can have important tax considerations, including the property's tax basis and potential capital gains. The circumstances of the estate and individual heirs matter.

Before making assumptions about what you'll owe—or what you'll walk away with—talk with a qualified tax professional.

How Long Does Probate Take in Alabama?

Don't plan on a two-week process.

Alabama has a six-month creditor period for probated estates, which means even a relatively straightforward estate takes time to fully administer. More complicated estates can remain open much longer.

That doesn't necessarily mean the house has to sit untouched during that entire period.

Real estate preparation, title research, cleaning, evaluating repairs and, in the appropriate circumstances, marketing and selling the property can often happen while other parts of the estate are still being handled.

Can a Real Estate Agent Help Before Probate Is Finished?

Absolutely—and this is actually when we would prefer you call us.

You don't need to wait until you're "ready to list."

An agent who regularly handles estate property should understand the vocabulary, the players involved and the general sequence of events. We can start researching the property, coordinate with the title company, evaluate its condition and value, discuss whether repairs make sense and help you create a realistic plan for getting the house ready for market.

We also know when a question is not ours to answer and needs to go to the estate attorney, closing attorney, title company or CPA.

That's important.

The Biggest Mistake Families Make

One of the best points from our conversation with Canopy Title was also one of the simplest:

Don't assume someone else's estate situation applies to yours.

Friends mean well. Neighbors mean well. The internet is full of advice.

But estate property involves real estate law, probate law, title issues, family relationships, taxes and money. One small difference in a deed, will or family situation can completely change the answer.

Build the right team early.

For most families, that means some combination of an experienced real estate agent, probate or estate attorney, title/closing professional and CPA.

You don't have to know exactly what to do before you call us.

That's the point.

If you've inherited a home in the Birmingham area and aren't sure where to begin, Art House can help you figure out the real estate side of the process, coordinate with the appropriate professionals and put together a plan for the property—even if you're nowhere near ready to put a For Sale sign in the yard.

This article is intended as general information about selling estate property in Alabama and is not legal or tax advice. Estate and probate situations vary. Consult a qualified Alabama attorney, title professional and tax professional regarding your specific circumstances.