Selling a House in Probate – North Carolina

What is a Probate?

This information is a great resource for anyone dealing with the probate process. It will explain what probate is and how you can navigate the often tricky process to sell an inherited property in probate while still making a profit.

This information is not intended to provide legal advice:  This will give an introduction to the probate process but is not intended to provide any legal advice.  Probate is a complex process which does carry personal liability so professional legal services are always a sound starting point.

Probate Overview

Probate is a formal legal process used when a person passes away which ensures that assets are properly handled and transferred according to the decedent’s wishes and/or state laws.  The process is court supervised.  The process steps include making sure a will is valid, completing an inventory of all the assets, paying the debts, and finally distributing any remaining assets to the appropriate beneficiaries.  Generally, the probate process is required if someone dies and they have property in their name only, meaning there are no designated beneficiaries or co-owners.  This includes all types of property such as homes, land, cars, and bank accounts.

Here are a few terms used frequently in the probate process.

Testate/Testator:  If someone dies and they have a valid North Carolina will, they are said to have died “testate” and they are called the “testator”. 

Intestate:  If someone dies without a will, they are said to have died “intestate”. 

Executor:  If a person is named in the will, they are called the executor.

Administrator:  When there is no will (or no person named) the person appointed by the court to manage the estate is called the administrator.

Personal Representative:  This is a generic term which is often used to refer to either an executor or an administrator.

Decedent:  The person who has died.

Letters Testamentary / Letters of Administration:  Documents which provide the personal representative the legal authority to manage the estate.

Will:  Legal document which describes how someone wants their assets handled after their death and also documents plans for the care of minor children.  The executor is usually named in the will.

High level overview of the probate process:

• The will is submitted to the Clerk of Superior Court in the county where the person who died (decedent) last resided.  The will is validated by the clerk.
• The executor (if named in the will) or administrator (if not specified in a will) is appointed.  Letters testamentary (if a will exists) or letters of administration (if no will exists) are issued.  The letters give the personal representative the legal authority to handle the decedent’s estate.
• The personal representative (PR) makes a list of all assets owned by the decedent.
• The next step is paying creditors (debts) and taxes.  There is a particular order that is required for this.
• Anything remaining is distributed either according to the will or the state laws.
• Final accounting of the estate is completed and the estate is closed.

What happens to a deceased person’s real estate

In North Carolina, real estate passes outside of the estate based on the will or state laws.  This provides the beneficiaries with the legal title to the property immediately.  However, if the real estate is needed to pay debts, it will need to be brought back into the estate.  The Notice to Creditors must be run in order for the property to be sold within two years of the owner’s passing.

When it might be required to sell a probate property in Raleigh

An executor’s main responsibility is to preserve the estate’s assets for distribution to any Heirs or beneficiaries, as outlined in the will. Sometimes a situation might occur where the estate owes a large amount of debt to creditors or the property has been neglected and back taxes are owed to the government. In this situation, the executor of the estate, the administrator, or the Court is allowed to sell the property to settle all debts, even if there are Heirs.

A good example of this is an elderly woman who passes away with an executor for her estate to manage her affairs. She has two Heirs. By the time she dies, she has racked up both hospital and credit card debt to the amount of $90,000. She leaves a home worth $150,000 but no cash assets and owes $80,000 to the hospital and $10,000 in credit card debt. Despite having passed, the estate still must find a way to pay off these debts. If the Heirs are unable to cover the debt themselves, the executor will need to sell the property to pay off the $90,000 of debt. Once the house is sold, the remaining $60,000 would be divided between the two Heirs.

A property in probate may also be sold if the person died with no will and there are no immediate Heirs. In this situation, the Courts can order the property to be sold and any profits distributed to the closest relatives.

Other Property Considerations

Changing Locks: The personal representative should get the locks changed on any estate property to avoid access by anyone who doesn’t have a legal reason to entering. Additionally, any valuables should be stored in a safe or a secure location.

Review Insurance: If the property will be vacant, consult with the insurance company to be sure of any coverage considerations for a vacant property.  Regular insurance policies many times do not have any coverage for vacant homes.  This is because vacant homes are more at risk for being vandalized.  Also, if there is a water leak, fire, or storm, no one would be there to know and possibly limit any damage. Usually a home is considered vacant if it is not occupied for more than 30 days. 

Consult with Mortgage Company: Based on regulations that are part of the Garn St. Germain Act, the due-on-sale clause cannot be enforced if the property title passes to a relative upon the borrower’s death.  However, it is important to provide proper documentation, which will be required by the lender.

Mistakes to Avoid When Selling a Probate Property 

Moving Too Quickly 

When a person passes away, their family may try to move as quickly as possible if there is debt that has interest which is compounding monthly. However, it’s important to follow all the legal steps of the probate process so that creditors are paid in the correct order.

Not Completing a Real Estate Disclosure 

If you do not have a full understanding of your state laws, be sure to sell your property directly to an experienced investor who doesn’t mind purchasing a property in probate. This includes understanding that you might not have lived in the property and won’t have first hand knowledge of details on the disclosure form. They should be willing to take the risk of purchasing a home from someone who is not personally familiar with the property.

Failing to Hire a Lawyer

We can not emphasize this enough – a knowledgeable real estate lawyer with experience in probate can help you navigate the process of probate much faster and easier than going at it alone! They’ll be able to guide you through the legal steps to sell that unwanted house or property faster, with less stress and hassle. Even consulting will help ensure you aren’t missing the blind spots of the probate process.

Waiting Too Long to Start the Probate Process

When someone loses a loved one, grief may cause us to put everything on hold while we process the loss of the deceased in our life. But what happens to the probate property during that time? Property taxes continue to add up, utility bills continue to come in, and the bank will want its monthly mortgage payments until the property is settled. Waiting too long can cause the estate’s expenses to add up fast, eating into the estate’s assets and leaving you in a difficult situation.