What’s an Estate Sale?
By Cindy Siok, Principal Broker of At Home Hawaii
The death of a relative presents a unique set of challenges. You have to weather emotional turmoil and deal with real world details – such as selling your relative’s home. Selling a home after a relative dies is known as an “estate sale.” The term “estate sale” can be used to describe an auction or sale where furniture and other possessions are sold. Both are proper usage of the term, but most real estate agents will think of an estate sale as selling a house.
An estate sale is similar to selling any other home, with a few extra considerations. Working with an agent that knows how to address potential hurdles of the estate sale will make the process easier. The most common situation is a son or daughter selling a parents home. Typically, there will be lots of memories surrounding a parents house, particularly when children grew up at the home. Memories can make selling more difficult and some children opt to hire a property manager to rent out the home rather than to sell it. It’s important to consider all the options.
When figuring out how to sell an estate, there are several important considerations. I’ve outlined 9 things to consider below:
1. Transferring real estate after death
In Hawaii, if a person dies with a real property interest titled in their individual name, then in order for that person’s interest in the property to pass on to their loved ones, that person’s estate will have to go through a court proceeding known as “probate.” If a person dies intestate (without a will), then there is a law that spells out exactly who gets what from that person’s estate. If a person dies testate (with a will), then the will controls who gets what.
However, if a person dies with a real property interest titled in the name of a trust, then the successor trustee may follow instructions in the trust about the real property interest without having to go to court first.
If a relative has passed away owning real estate--either in their individual name or in a trust--I would highly recommend speaking with a qualified estate planning or probate attorney about the next steps. Let me know if you need a referral to one.
Once a person passes away, their estate becomes responsible for any assets and debts that they had. The only person(s) who should be handling any estate matters are the successor trustee(s), or the court-appointed personal representative(s) (depending on what type of asset or debt you are dealing with). If you personally make payments on behalf of the deceased person’s estate, be sure to keep a record and receipts, but be aware that you may not necessarily be reimbursed for those payments. Again, if you have any doubts or concerns about this, I would highly recommend speaking to an estate planning or probate attorney before taking any action.
2. Hire a Top Real Estate Agent
Picking the right real estate agent is critical to your success. From pricing the home correctly to having an exceptional marketing plan to staying in constant communication, your agent needs to be on top of their game.
When selecting a real estate agent in an estate sale, you might want to look for an agent who has experience and good reviews online at places like Yelp!, Zillow.com and Realtor.com. You can also see if an agent has any complaint history by calling the state’s Regulated Industries Complaint Office (RICO) at 587-4272. A good agent will make the process smooth and easier on the family, a bad one could add a lot of stress to a family already in mourning.
3. Keep paying the bills
It is in your best interest to stay current with bills related to the home – like the mortgage, utilities, and maintenance – until you finalize the home sale. The mortgage company and other service providers will still expect to be paid. Paying the bills, however, should be done through the estate and NOT personally.
If you are dealing with the death of an older parent, it’s possible they had a reverse mortgage. If so make sure you follow the necessary steps with the bank when selling in this circumstance as they will have a loan that needs to be paid back with the sale of the house.
4. Collect all the necessary documents related to the home.
Financial documents are essential for the distribution of the estate, including the home. Without all the necessary documents things become much more complicated. Often all documents won’t be in the same place. Sometimes people stash them in hidden places. It is worth the time to search everywhere, including attic space, the garage, and even look under the mattress and drawers and go through all the boxes and files you find.
The documents you will want to gather may include:
• Will – If there is a will, it will significantly simplify the distribution of the estate.
• Receipts from bills – You will need to freeze your relative’s credit and contact all creditors, including the three major credit reporting agencies.
• Investment documents – Your relative may have had stocks and/or bonds.
• Insurance documents – There may be a policy from an employer, or one purchased privately.
• Homeowner’s policy – Keep homeowner’s insurance up to date and increase coverage if necessary.
• Bank account documentation – You want accurate information on all of your relative’s bank accounts.
• Personal documents – If your relative had any personal documents, like journals, poetry, etc., you might like to have it at a later date for sentimental reasons.
Once you have gathered all the documents you need, shred everything else that has personal information on it – especially social security numbers. It is a common for identity thieves to use the social security numbers of the deceased. By shredding all documents with the number on it, you’ll make identity theft a little more difficult.
5. Change The Locks and Mail Delivery
When selling a home as an estate sale, it is essential you have complete control of the property. This includes forwarding the mail, so you receive it in a timely fashion, along with enhancing the home’s security by changing the locks and possibly putting up video surveillance cameras. Keep in mind there are going to be people who know about the death and realize the home may be vacant.
6. Go Through Everything in the Home
Ideally you will clear out the home altogether – and have it staged professionally for sale – or at least take out personal belongings and only leave behind enough furniture for staging purposes to aid in the sale.
Clearing out an entire home of possessions, particularly if you have emotional ties to them, can be tiring and stressful. The basics of organization require the creation of categories – what you will do with each item as you process it. You want to keep some items, throw away other items, donate others, and maybe sell some things.
If there are things that family members are going to want, especially items that there may be some dispute over, go ahead and set them aside to deal with later. The sooner you get everything out of the home, the sooner you can put it on the market for sale.
If your parents were in the fortunate position of owning a lot of valuable possessions you many want to hold an estate sale for these things. Having an estate sale will allow you to maximize the value of your parent’s belongings. It’s also pretty easy to sell things via Craigslist or eBay and other online marketplaces.
7. Getting a Home Ready to Show
Once you have processed all the personal possessions of your relative, you will be ready for the actual sale. Often when selling a home that was owned by an older relative, or a house that has been occupied for decades, there is extra work involved in prepping the house for sale. The house may be dated, including old wallpaper, old carpet, bad paint, etc. It may also have damage that has gone unaddressed for a long time.
You will want to bring in a helpful real estate agent to give you advice on what needs to be changed or repaired before you put the home on the market. If you want to get the best possible price, you will probably need to make some changes, which may include:
• Getting rid of old furniture
• Changing or removing old window coverings
• Removing wallpaper
• Replacing dated flooring
• Refinishing hardwood floors
• Applying a fresh coat of paint
• Ensuring all windows operate properly
• Installing new fixtures
• Updating lighting
In addition to any changes you make to the home, you will want to clean it thoroughly. There is nothing more critical to the sale of a home than a proper cleaning. If you do not want to do the work yourself, ask your real estate agent for a references for someone who will do a good job for both the handyman work and the cleaning work.
Once you have gotten the home prepared for buyers, then you can have your real estate agent begin marketing and showing the home.
8. Did The Seller Die in The Home
For many buyers, death occurring on the property can be a problem. In Hawaii ,you have to disclose whether a suicide or murder occurred in a home, but it is customary to disclose any death in the home. Doing the right thing is essential, so make sure to disclose the death on your Seller’s Property Disclosure Statement.
9. After Estate Sale Tax Consequences
When selling an estate one of the most important financial considerations will be dealing with taxes. For vital tax considerations and how they relate to your personal circumstances be sure to google the IRS guidelines on estate sales and talk to a CPA. Having a massive unexpected tax bill is never fun. In fact, it is the last thing you’ll want to deal with after the death of a parent.