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, Palo Alto, and elsewhere in Silicon Valley.
Quick summary of what to do regarding the home first and soon when a loved one dies:
- Engage the help of of an attorney and tax professional within the first 30 days or so. Sometimes there are deadlines or goal dates that will help the beneficiaries, and if people take too long to connect with these professionals, some opportunities may close.
- Some attorneys are also tax professionals, but most likely these will be different people.
- A professional valuation of the home will be needed, usually done by a licensed appraiser, but sometimes a real estate professional can do a market analysis that is acceptable. The home does not have to be empty or cleaned out to have this done.
- If you need the names of good tax and legal professionals, feel free to reach out to your real estate agent (or to me, if you are local). Most of us have worked with trust situations and can provide names. Or ask friends and family who’ve recently gone through the same situation and were happy with the people that they hired.
- You will need several copies of the certified death certificate. Discuss how many with your tax and legal professional. If you sell or transfer the home, the title company will need it and it will be recorded with the county.
Death, dying, & real estate: where to begin when a loved one dies?
In terms of settling the estate, it is wise to first speak with an attorney and tax professional about the property to find out what is required and advisable.
You might receive very different guidance depending on if there was a will, or how ownership was held. 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 seek professional council on this point, so I strongly recommend that you or other beneficiaries discuss everything with the attorney or accountant prior to electing whether (or when) the home will be sold, rented etc., even in the short term.
When a loved one dies, it’s easy to put off tasks that are hard to face. Don’t let that mess things up for you and the rest of the family. Try not to wait too long before speaking to a tax or legal professional, as there may be a timeline or deadlines for you to consider in regard to settling the estate.
I have some wonderful people I can suggest if you would like a referral.
Next, how can a real estate professional help?
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. Some CPAs and tax professionals may accept this, but all will accept an appraisal (a document that only a licensed appraiser can generate).
This is another task that people sometimes drag their feet to do, but that’s counter productive. Please don’t wait too long to request the valuation be done! Establishing the home’s value at the time of death is most easily done if not too much time has elapsed. It can be hard to recall market conditions years later and also the necessary data 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. In 2013 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 – extremely minimal, one line statements with only the address, square footage, beds, baths and price listed. With so little useful information, the valuation is limited in its accuracy and takes an inordinate amount of time to accomplish.
Preferably, schedule the valuation not longer than a few weeks after the death. Sooner really is better for this task.
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.
Beyond the valuation, your Realtor can suggest tradespeople and other resources to help empty the home, when you are ready. She or he can also speak with you about the market conditions, what may be better or worse timing, and what the selling process is like, should you decide to sell the property. Obviously, there’s much more that a real estate sales person can do to assist, but these are the first steps.
Paperwork: beware the urge to purge everything
Before purging all of the accumulated paperwork in the home, if at all possible, pull out information on when the property was purchased, any major repairs or additions, and so on. This information may be useful to the tax professional and attorney, and it may also be helpful if the home will be sold or transferred to a family member. For instance, if a family member takes over the house, he or she would want the records on who re-roofed the house, added air conditioning, serviced the appliances, and so on.
The temptation to throw every document out is strong after a loved one dies, but allow a few boxes of house records to be put aside until everyone is sure that they aren’t needed. It’s easy to dispose of them later, and a nightmare if they are needed but gone.
Selling the home after a loved one dies
Even in normal circumstances selling a home is a stressful endeavor, and when a loved one dies, even more so. After working with tax and legal advisors, and consulting with family members, if you decide to sell, a qualified Realtor can guide you through the sales process to help you to maximize the proceeds. We have worked with many sellers who were parting with real estate after an owner’s death, and each was unique. Our work and recommendations are always tailored for the specific property and our clients’ needs, but here are a few quick tips to begin with.
- Try to give yourself plenty of time to prepare. Even in the best of situations, it can take 2-4 weeks to be really ready to have the home on the market. When a loved one dies, it may be more challenging to do things as quickly as you’d normally be able to.
- It is wise to hire your real estate agent early in the process. It does not cost more to do that, and it will likely make the process easier and less expensive for you and the estate in the long run. She or he can suggest professionals to help you with many aspects of getting ready, including folks who specializing in sorting through things, various types of cleaners, handy people, licensed electricians and other contractors, landscapers, etc. (Most sales are As Is, but there is prep work done in most cases since that increases the net proceeds from the sale.)
- Remove any fixtures that you don’t want to sell with the property first. Whether it’s a light fixture, the curtains, or a favorite rose bush from the garden, it is generally better to take these from the home before marketing it. Going through and relocating belongings first eases stress and can avoid conflict if a buyer enters into escrow with the expectation or a request to keep something, especially things that might normally transfer with the home like the curtains or rose bush. After a house closes, everything that is not part of the sale will have to be removed anyway, so it’s important to know where things are going early on and avoid the extra stress in escrow.
- Disclosures can be a little different when there has been a death, and there could be less or more to disclose. The sale of an estate may or may not require the usual seller transfer disclosure statement. Alternatively, if the death occurred in the house, it will have to be disclosed within 3 years of the death or any time after 3 years if the buyer asks (at least here in California).
- Stigmas don’t have a 3 year time limit, so if the death was from a murder or suicide, that’s something that buyers are always entitled to know. (Again, this is the case in California).
- Documentation is extremely important during the sale, too. The title and escrow company will need a certified copy of the death certificate (it’s good practice to order multiple at once for things like this so you do not have to keep going back to the funeral home), among other things. They will get it recorded with the county as it relates to the transfer of title.
- If you are able to provide info on major components of the home, such as a re-roof, that is a plus for the listing agent’s disclosure package.
Selling before the loved one dies
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, an attorney or tax expert may suggest not doing this due to the impact of taxes being different before and after death which, in some cases, can be enormous. If you are in this position, please seek advice from a tax representative or attorney first! 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.
I have written more on the subject of selling a home with a serious or terminal illness, so feel free to read more about that in my previous article.
When a parent, spouse or loved one dies, there are a myriad of emotions, memories, pressures, things to do, decisions to be made. It can be overwhelming – we know first hand how hard it can be. The tasks are much easier when family members engage trusted professionals early in the process. Those professionals can lay out a checklist of things to do and decide, and they can be tackled one by one and be less of an avalanche. Those professionals may assess the situation and say “take x amount of time before you take care of 1-2-3”. Or they may say “if you do this sooner, the estate will save on costs”. Each situation will be different.