When a parent, spouse or loved one dies and he or she owned a home, there’s a lot for the survivors to do in addition to the very real and painful process of mourning. I have been through this with my own parents (and their house in Saratoga), a great aunt in Willow Glen and many clients in San Jose, Los Gatos and elsewhere in Silicon Valley.
Where to begin? in terms of settling the estate, it is wise to first speak with an attorney and tax professional about the property (will, trust etc. if applicable) and what they advise and require to help in doing what is required and adviseable. (I have some wonderful people I can suggest if you would like a referral.) They will try to help you to legally minimize capital gains and estate taxes and can advise you on topics such as when might be the best time to sell vis a vis the tax liability. This is extremely important and it can be very expensive to not take into account their guidance on this point, so I strongly recommend that you or other beneficiaries discuss everything with the attorney or accountant prior to electing whether the home will be sold, rented etc. in the short term.
How can a real estate professional help?
Most often, something you’ll need for the lawyer and CPA or other tax professional is a valuation of the home as of the date of death (whether or not there is a surviving spouse or co-owner). You can obtain this by hiring a licensed residential real estate appraiser who will do an appraisal for you. Alternatively, you may be able to engage a real estate licensee (salesperson) to do a competitive market analysis or comparative market analysis (CMA), which would provide the probable buyer’s value for the property.
Sooner is better: Please don’t wait too long to request the valuation be done. The task of establishing the home’s value at the time of death is most easily done if not too much time has elapsed, both because it can be hard to recall market conditions years later and also because the data needed can be more challenging to obtain. Our multiple listing service or MLS only keeps info online for about 10 years. At times, though, I’ve been asked to reconstruct the likely pricing or value going back much further. Last year I did one going into the 80s! That required driving out to the MLS offices in Sunnyvale and culling through old books of sales records – which were extremely minimal, one line statements with only the address, square footage, beds, baths and price listed. With so little usable information, the valuation is limited in its accuracy and takes an inordinate amount of time to accomplish.
Additionally, in some cases your lawyer or CPA may suggest that you sell the house in the same calendar year in which the death has happened for tax reasons. If you wait to address any of these issues until a lot of time has passed, some windows may be closed.
Other odds and ends on death and dying & real estate:
In addition to needing the appraisal or market value of the property at the time of death, your accountant or attorney will probably also ask for information ore receipts needed to establish the “basis” of the property (if not now, then when it is transferred, most likely – it depends upon when the home was purchased). The basis is what the homeowner has put into or invested into the house or home. For instance, if points were paid on the loan at the time of purchase, that is part of the basis. So too would be important capital improvements.
If your mother, father or loved one kept the papers and costs from the time of purchasing the property and from major expenses (remodeling, house expansion, re-roofing etc.), this will help immensely. It can be time-consuming to have to dig through years of paperwork but it may end up saving the estate and its beneficiaries a lot of money in the long run.
On a related note, I have at times been approached by someone who is dying and who wishes to sell so as not to leave that task to a wife, husband, or others. Depending on the circumstances (though not always), an attorney or tax expert may suggest not doing this due to the impact of taxes being different before and after death. In some cases, it can be enormous. I have at times talked myself right out of a listing by strongly advising my clients to see a tax person prior to signing a listing agreement when this was the situation.
It is very difficult, when a death of a mother, father, spouse or other close loved one has died to turn toward the business aspects of settling the estate. I know this firsthand. Waiting to see legal, tax and realty professionals will tend to complicate things, though, so I suggest arranging appointments within a few weeks of the loved one’s passing if at all possible.
For further reading on working with tax and legal professionals:
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(all data current as of 7/21/2017)
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