What to know about probate property sales in Texas
Selling a property during probate in Texas takes longer than a traditional transaction in most cases because of state regulations.
For instance, Texas law requires the final sale price to be at least 90% of the appraised value.
In addition, buyers must include a 10% deposit with any offer.
At the court hearing to consider an offer, Texas allows “overbidding,” where anyone from the public can make an offer, as long as it is at least 5% plus $500 over the original.
Selling property during probate is undeniably more complicated than simply transferring ownership. And in Texas, there are a number of state regulations that make these sales even more challenging.
Since offers must meet several legal standards beyond a typical sale, selling real estate during probate typically takes longer than it does during traditional transactions.
Thus, understanding state law on real estate sales during probate is crucial to avoid unnecessary delays that will extend your probate timeline.
Whether the sale is needed to pay the estate’s debts or to resolve issues with multiple beneficiaries, the quickest sale with the best return on your loved one’s investment is the goal. To this end, there are a number of things to learn before you put a home on the market during probate.
Maintaining the home
It is important to remember that there are holding and carrying costs to consider when a property is in probate, during which the executor or primary beneficiary assumes responsibility for its upkeep.
That includes property taxes, property insurance, landscaping, basic maintenance, and repairs. If no one is living in the house, the house needs to be secured to prevent burglary and theft.
Because probate can take anywhere from six months to two years, the costs can be significant.
Preparing to sell the house
You generally cannot handle inheritance of property without grant of probate or without court approval, including a title search (attempting to do so can expose you to tax penalties or legal issues).
Once probate is initiated and the court has empowered an executor or administrator to act on behalf of the estate, a formal appraisal is generally required.
When considering offers, be aware that Texas requires them to meet certain requirements to be approved by the court. For instance, the final sale price must be at least 90% of the appraised value, and all offers must be accompanied by a 10% deposit.
What’s called a Notice of Proposed Action is then mailed to all heirs, which states the terms of the proposed sale. The heirs have 15 days to register any objections.
If there are no objections, the sale either proceeds without a court hearing or a date is set for the sale to be finalized in court, depending on the type of probate process. (With what is known as independent administration, there is minimal court supervision. But with dependent administration, the court must approve every step.)
If there is a hearing, it will take place 30-45 days after application. In the meantime, the real estate agent can continue to show the property and try to get a better offer.
The overbidding process
Once the hearing date is set, anyone from the general public can attend the hearing and attempt to outbid the accepted offer. New bids must be at least 5% plus $500 over the original offer.
The judge accepts additional bids similar to an auction until the highest bid available has been received; the court must accept the highest valid bid, and the original buyer is refunded their 10% deposit.
The final sale price must be at least 90% of the appraised value, and all offers must be accompanied by a 10% deposit.
Once that happens, escrow begins, and closing takes place about 30-45 days later. Upon being accepted for an overbid, the buyer must give the executor a cashier’s check for 10% of the price at the hearing and sign the contract, which can have no contingencies.
When there is no will
All estates without a will must go to probate court in Texas. When it comes to real estate, the title can be transferred to heirs through an Affidavit of Heirship.
Each heir fills out the affidavit and has it notarized in the presence of a witness who knew the person who died and is not a family member. (In some cases, a family member can act as a witness if he or she does not stand to benefit from the estate and won’t be contesting it.) The affidavit(s) must then be filed with the county clerk.
It’s important to note that even after the Affidavit of Heirship is filed, the title transfer isn’t finalized. Instead, it is used as evidence in probate court to determine the correct heir to the property.
Once heirs are identified, an attorney prepares a Warranty Deed, which is filed with the county in which the property is located. Only after those steps are complete may the heirs begin the process to sell the house.
In fact, many title companies will not approve the transfer of title, even with a court-approved Affidavit of Heirship, until at least six months have passed following the death of the property owner.
In Texas, selling a property during probate can be a difficult task, especially if there are ownership disputes. While the state requires that estates retain an attorney for probate in most cases, this specific situation may require a lawyer with more specialized experience with real estate and probate.
That is a highly advisable option, for peace of mind and to make sure the transaction goes as smoothly as possible, particularly if you are dealing with a complex or high-value estate ●
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