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.
Death, Dying, & Real Estate: Where to begin?
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 adviseable.
You might recieve 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.
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 regards to settling the estate. I have some wonderful people I can suggest if you would like a referral.
First Steps, and 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.
Sooner is better. 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.
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
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 or receipts needed to establish the “basis” of the real estate. Even if it is not requested now, it will be when the home 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 realty 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, and stress, in the long run.
Selling the Home
Even in normal circumstances selling a home is a stressful endeavor, and after a death even more so. After working with tax and legal advisors if you decide to sell, a qualified Realtor (like myself) can guide you through the sales process. I have worked with many sellers who were parting with real estate after an owner’s death, and each was unique. My work and my recommendations are always tailored for the property and my clients needs, but here are a few quick tips to begin with.
When you’ve decided to sell, try to give yourself plenty of time to prepare.
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 anyways, 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).
Documentation is extremely important during the sale, too. The title and escrow company will likely need a 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.
And do be upfront with your agent about who is selling and who is signing. We understand that selling real estate with siblings or an older parent can be a challenge, but we’re here to help.
Selling Before You Die?
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.
It is very difficult, when grieving the death of a mother, father, spouse or other close loved one to turn toward the business aspects of settling the estate. I know this firsthand. However waiting to seek legal, tax, and realty professionals can complicate things further, 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:
Why Good Realtors Refer Buyers and Sellers to Lawyers and Tax Professionals for Some Questions
