Tips for Realtors New to Probate (in Florida)
Probate seems to be the “next big thing” in the real estate world. Many realtors are trying to find ways to attract sellers looking to sell a property that is in probate and often do this by reaching out to probate attorneys. I know this because I am a probate attorney and work with dozens of realtors regularly and am contacted by no less than ten realtors per day asking if the probate I am handling has any property that needs to be sold.
That being said – I get the interest. Florida is a retirement state and it is inevitable that those that retire here will likely pass away here. They also probably own property in Florida. Unless they did some sort of estate planning (which most people do not and is a topic for another day), it is likely that the property will have to go through probate in order to be sold.
This article is intended for the realtor who has heard about probate but has not had any experience in dealing with a seller who may have a property that needs to go through probate. Below, I am going to give a real-life example that illustrates many of the pitfalls of trying to list a property before consulting with a probate attorney. I will end the article by giving a few tips that will help you, the realtor, stand out from your competition when preparing for a listing presentation and ultimately help you sell a property in probate.
First things first: What is probate?
Probate is the legal process whereby assets are distributed to the decedent’s heirs. Basically, the court determines who gets what of a person’s stuff after they die. If they had a will, the court will honor the will. Generally speaking, just having a will does not avoid probate. From a realtor’s perspective, probate is the process of getting clean title so that the property can be sold.
Yeah, I got a Listing! But the owner is dead…
John and Jane own a home. They have lived in the home for 25 years and they are both on title as husband and wife. Sadly, John dies. He did not have a will. However, their house was their only asset and because his wife was on title, she owns the property free and clear. At this point, there is no need for probate as title passed automatically to Jane.
John and Jane had two kids together: Steve and Elizabeth. Jane, is starting to get up there in age and is thinking that maybe she should do a will. Her attorney drafts a will, which leaves everything to Steve and Elizabeth 50/50. Several years later, Jane dies.
Fortunately, Steve and Elizabeth remained friends after their parent’s death and decide they want to sell the property and split the proceeds. They call Stacy, their local realtor, and tell her they want to list and sell the property ASAP. Stacy, excited that she just got a listing, immediately puts the property on the MLS and starts showing the property. Within hours, she gets a call from an eager buyer who offers full asking price and wants to close in less than 30 days. Steve and Elizabeth, though still grieving their mother’s recent passing, are thrilled that Stacy was able to get the property sold so quickly.
Stacy sends the contract and file to her favorite title company to get everything ready for closing. The title company asks Stacy for some documents showing that Steve and Elizabeth have the authority to sell the property. Stacy calls Steve and Elizabeth asking how they own the property to which, they respond: “our mom left us the property in her will”. They give the will to the title company. The title company immediately writes an email to the realtor and sellers saying: “we got a problem”.
Problem Number 1: This property isn’t going to close without probate. A will isn’t going to cut it. The title company needs an order from the court saying that Steven and Elizabeth own the property or are at least authorized to sell the property.
Problem Number 2: The sellers are possibly in breach of contract and in theory, could be sued by the buyer and now liable for damages. It is unlikely that the contract signed by the sellers and buyers had any provisions in there that stated the sale was contingent on the authorization of the probate court or that the closing date should be set a certain number of days after receipt of the Order Authorizing Sale.
Problem Number 3: Everyone is mad. The seller is frustrated that they can’t sell when their mom wrote a will saying they inherited the property. The realtor is mad at the sellers and probably the title company because, well, title companies and attorneys are always slowing down deals and causing problems. The buyers and their realtor/attorney/title company are angry and threatening to file a lawsuit against the sellers. And everyone is mad that they just wasted a month (or likely longer).
Problem Number 3: Everyone is mad. The seller is frustrated that they can’t sell when their mom wrote a will saying they inherited the property. The realtor is mad at the sellers and probably the title company because, well, title companies and attorneys are always slowing down deals and causing problems. The buyers and their realtor/attorney/title company are angry and threatening to file a lawsuit against the sellers. And everyone is mad that they just wasted a month (or likely longer).
What’s Next?
It is likely that at some point either the title company, friends and family, the realtor’s broker or someone will mention the word probate. The above example is a brief illustration of what could happen if the realtor did not know what to ask the seller when learning that the property was owned by a person who recently passed away. To be fair, most realtors would not have acted like Stacy the realtor and would have done a bit of research before listing the property. However, I have seen realtors that list properties without consulting with a probate attorney and it really makes a mess of things. So, below are few helpful insights that will help you the realtor have a smooth transaction when dealing with a property that needs to go through probate.
Three Probate Tips for Realtors(in no particular order)
1. Find out if the property was the decedent’s (person who died) homestead.
It is very important to determine whether the property was a person’s homestead. (Note - this is geared towards properties in Florida and may not apply elsewhere). Generally speaking, the heirs are not liable for the decedent’s debts. Using the above example, let’s say that Jane died with $25,000 in credit card debt. The only asset she had when she died was her house. So, how is the credit card company going to get repaid? If the only asset is the property, the credit card company could force the sale of the property in order to satisfy Jane’s debt.
Obviously, Steve and Elizabeth do not want that to happen. This is why determining that the property is homestead is so important. Homestead in Florida is a sacred right and is protected by the Florida Constitution from creditors. What that means is, if the court, in this case the probate court, determines that Jane’s home was her homestead, then the credit card company and any outstanding creditor she may have cannot force the sale. Basically, those creditors are screwed. The last thing you want is to list a property only to find out that the decedent had an enormous amount of debt.
So how does the court determine the property was Jane’s homestead? In most probate actions that we do, we file a utility bill that has the decedent’s name on it, a summary from the county’s property appraiser that shows the homestead tax exemption and a sworn affidavit signed by a person (non-relative) that knew the decedent and knew that it was their primary residence. Generally, with these documents, the court finds that it is sufficient evidence that the property constituted the homestead of the decedent. Once the court finds that the property is homestead, it is taken out of probate and no creditors can touch it.
2. Find out who the heirs are and make sure the person you are talking to the person that is really entitled to the property.
It is possible that you could get lucky and have a situation like above where the parents had two kids, who get along and on top of that, there is a will specifying that the kids are to split everything 50/50. And truthfully, eight out of ten times everything is smooth, and it is very clear who inherits the home and the parties who do inherit the home all agree. However, you can likely imagine a situation when it is not so cut and dry.
One of those sticky situations might be as follows: A man owns his home. He is divorced and has three kids from his first marriage. He remarries. His new wife has a minor child from a previous marriage. The husband dies without a will or any estate plan. The new wife and minor child live in the home but the three children from the previous marriage feel they should get the home. So who gets what? This is a common fact pattern.
Long story short – when you encounter a property that may need to go through probate, contact a probate attorney. Death and money have a (sad) way of bringing out the worst in people and it is a good idea to start off on the right foot and try and get everyone on the same page. Don’t start out in a fight if you can avoid it. Not to mention, you don’t want to waste your time trying to get a listing agreement for someone who won’t even be inheriting the property or tell your client that they are going to get the home only to learn that they won’t. That is a quick way to get someone extremely mad at you.
3. Be Patient and Manage the Seller’s Expectations.
If you are a realtor, you know that a seller expects the house to be sold the day you sign the listing agreement and they expect full asking price and likely are trying to get you to lower your commissions. It’s frustrating. I get it. The positive thing about probate is that most sellers have never been through it before and already assume it is going to take a long time. The negative is that they have recently lost someone, are still in a grieving process and the last thing they want to do is be dealing with realtors and attorneys. They want to be done with everything ASAP. That being said, the best thing you can do for yourself, for the attorney and for the client is to manage their expectations.
Please do not tell them the attorney has guaranteed that the probate will be done in two weeks or less. The probate process is similar to selling a home. There are many factors that can contribute to how quickly it happens. That being said, I have found that giving a range of three to six months is an accurate time-frame. However, we have gotten a client title in less than 30 days, but this is the exception and not the norm. Trust me, I am not a patient person but have found that guaranteeing a client that they can sell the property ASAP, is bad for everyone.
Final Thoughts
I hope you found this article useful and has given you some useful tips to use when you approach a potential client that has a property that may need to go through probate. I believe probate is a great niche for realtors to get into and if you educate yourself on the probate process, even just reading an article here and there, you will really stand out amongst the competition. Good luck out there and if there is anything we can do, just give us a call!
Good Luck!
Justin Stivers
