By Alex Craig
Certain property types—like inherited property—require more specialized knowledge. It’s essential to understand some of the nuances that comes with selling an inherited property in order to serve the client and the transaction well. Though there are many layers, some high-level knowledge is helpful.
Perhaps this is your first time listing an inherited property, or you’re looking to break into this niche to differentiate yourself. Here’s what you need to consider to give you and your clients the best service.
Who Has The Authority?
Property is inherited through various legal vehicles, such as a trust, probate, quit-claim deeds or in my home state (Michigan), a ladybird deed.
As a result, it’s easy for adult children or beneficiaries to misunderstand who has proper authority. As a real estate professional, it’s vital to ensure you establish proper authority to make all documents and agreements a legal contract. If you don’t do so when selling an inherited property, it’s possible that legal, or at the very least familial, ramifications could happen.
Here is an example that is fairly common when working in the estate space:
Mom wants to avoid probate upon her death, so she lists her son on the title of her home. They typically become joint tenants with rights of survivorship, where the property will transfer to the son upon the mother’s death. Mom probably said she would like the property sold and the proceeds divided among her remaining children.
In this instance, the only person with proper authority to list the inherited home after the mother’s death is the son listed on the title. It does not matter if she verbally said that she wanted the home to be sold and the profits split. Even if she named someone else as the executor in her will, the son on the title is the only person with authority over the property.
I’ve also experienced a situation where four children were listed equally on the deed. However, it was only one daughter who handled selling the property.
To make listing contracts and purchase agreements valid, I needed signatures from all parties listed on the deed.
When in doubt about proper authority, there are three people to seek guidance from:
- A local attorney: if an attorney is associated with the estate, like through probate, then ask the attorney.
- Your broker: ask your broker if they have experience with this.
- Legal Hotline: contact your state or the national legal hotline to get clarification on establishing proper authority and legal contracts.
Perform a Detailed Value Assessment
Doing a detailed comparable market analysis is necessary when listing an inherited property. Though the broad approach of gathering a few comparables and offering a wide range to your client is acceptable for a standard property listing, it is a good idea to complete a more detailed comparable market analysis or hire a property appraiser before listing the home.
A detailed value supports and establishes a fair market value range. This is important for you and your clients because it mitigates liability when selling property as part of an estate. Parties can sue an estate or trust if a property is sold for less than fair market value.
The second reason to determine market value with greater accuracy is for tax purposes.
I recommend agents considering breaking into this niche either hire an appraiser before listing the property or get the Pricing Strategy Advisor certification from NAR.
Marketing The Home
Marketing an inherited property is similar to marketing a standard listing. However, most of the time, you are listing a home that has either been neglected, had maintenance deferred, or is outdated. There’s a possibility that you might run into all three.
As a result, most of your marketing decisions will come down to whether repairs should be done. Will a repair, upgrade or improvement have a compelling return on investment that leaves your clients better off?
The answer to this question will depend on your local market.
As a simple framework, you need to guide your clients to focus on simple, low-cost repairs that have a significant impact. Examples might include removing old, dated carpet in a room to reveal the hardwood floors underneath or patching large drywall holes.
The goal is not to make the home perfect. Instead, the focus is on improving the potential of the home. Seeing the potential is hard for home buyers when there are holes in walls, old carpets hiding wood floors, and overgrown landscapes.
If repairs aren’t really possible due to costs or other various constraints, that brings me to my last point.
Get A Cash Offer
When listing an inherited property, you should reach out to your local investors and have them make an offer on your property.
You’re not trying to sell the property for less, but you want to give your clients options. There is a certain percentage of clients who inherit a property and are looking to sell it as-is. Get them a couple of real estate investor offers. Do this by contacting local investors and explaining to them the seller is trying to sell at list price, however, they would like to keep the offers on the table should the situation change.
These offers are an option for the seller. Walk your seller through each offer, explain the benefits and disadvantages of each, and let them make the choice. Your goal is to guide rather than to persuade.
Once offers are on the table, it’s important to ensure you have everything lined up correctly. If you plan to accept an offer inside probate or a house is inherited through a trust, you will need to verify beneficiaries are all in agreement on the sale price so that you don’t open your client up to liability issues.
Listing inherited properties is a great niche. If you’re an agent that loves the legal aspects of real estate and is more type-A, you may find a lot of joy in adding estate, probate and trusts into your real estate services.
Few inherited properties have the same circumstances. When in doubt, always seek out information for your specific situation. Remember that it’s important to utilize the services available to you to ensure you’re following best practices and providing optimal service to your clients in this niche. Your best resources will be your broker, local attorney and NAR’s legal hotlines.
Stay tuned for Part Two. We will dive more into the emotional side and how to navigate the complexities of multiple parties and family members.
Alex Craig, a real estate professional with Century 21 Looking Glass in Lansing, Mich., helps homeowners sell their homes for maximum cash in their pocket by taking a data-driven approach and executing a systematic marketing plan that uses current digital marketing strategies. Craig also runs the Dolinski Group (www.dolinskigroup.com), a company focused on helping real estate agents get more from their careers and earn more without the heartache.
Thank you Alex!,
The timing of this article couldn’t be more perfect! I just acquired a good listing of an inherited property of significant value.
I have had a handful of these type of listings over the years, however this one is significantly different, as the beneficiary is not a family member, and he has decided to include the caretaker of the property to the Listing Contract, and include him as a partner in the sale of the property for his many years of assistance, dedication, loyalty to the family, and knowledge of the property.
Your article has prompted me to elevate my due diligence to a higher level.
The listing will go live the week of March 20th.
Can’t wait to read part #2 of the article.