Family Real Estate in Probate Can Be Easy, Or Expensive.

When you are in a situation where your family has an issue with how things are going in an estate, it could be a simple fix or an expensive fix.   This is because when it comes to Real Estate, your broker can only do so much in order to facilitate the sale, the rest is up to the seller and buyer.

So let’s get some definitions out of the way to help you understand the process.  

First, intestate is defined as a person who has passed away without a will.   “But it was on his or her computer!” that does not make any difference.   The last will and testament needs to be witnessed and notarized to be a legal document.    

Second, intestate succession act is a North Carolina Law which says that if a person dies without a will, then the ownership of the property transfers immediately to the heirs or beneficiaries. 

Third, if a person passes away with a Last Will and Testament, they are to have passed testate, in which all of the functions of the Will is to be carried out by the Executor.  Each piece of what needs to happen is expressly written in North Carolina law – regardless of what the siblings or beneficiaries want, if it is spelled out, they can’t have their way – it’s the law.  But in the area of real estate, it can be completely upside down with or without a will.

Let’s give an example.  Frank and Bob and their two sisters, Sue and Brenda’s parents passed away.   The will did not expressly state that the real estate goes to anyone, or into the estate.  This means Title to real property owned in name of the decedent, or a decedent’s interest in real property owned as a tenant in common (equal and undivided shares), generally passes to beneficiaries or heirs pursuant to the terms of the decedent’s will or North Carolina intestacy law.

Tenants in common own an undivided interest in the property with full right of enjoyment of the entire property. The property is not partitioned or subdivided. With tenancy in common, however, there is no right of survivorship. When an owner dies, his or her interest passes through probate to heirs. It does not flow through to the other owners.   In this situation, Owner A cannot have Owner B pay for rent, as Owner B is an Owner.     If Owner A passes away, owner A’s ownership does not go to Owner B, but to Owner A’s children.   The only way that Owner B can have full ownership is of Owner B purchases the ownership from Owner A’s children.

Frank was named Executor, but does not have authority to sell the property in the will.  At the time of death, Frank, Bob, Sue and Brenda are considered Tenants in Common.  While the word “Tenants” is confusing, it means ownership interest.  Much like a tenant in an apartment, who also has an ownership interest. 

Sue decides to hire a real estate broker to sell the property and did not tell the other three.  Because Sue don’t own the entire property, one tenant in common can’t sell the entire piece of land or a home without permission from all of the co-owners. If, however, all of the co-owners agree, the property can go on the market and get sold.

Sue has contacted a Real Estate Broker and they all agreed to list the property, and there is an offer on the table, but one person, Frank’s wife refuses to sign because she don’t want Bob to get a dime.   On closing of the Real Estate transaction, you can’t stop the disposition of money to the heirs.     Frank’s wife’s infantile response is out of Jealousy, and if serious enough, could lead to legal proceedings that can cost hundreds of thousands of dollars.

Here’s a sub-example.   Frank, Bob, Sue and Brenda’s property is valued at $125,000 and they got an offer for $200,000.   Frank’s wife refuses to sign the paperwork because she don’t want Bob to get money from the sale.   Brenda does not want to continue to pay taxes on land that she will not be able to use since she lives 9 hours away.   Because of Frank’s wife, Brenda hires an attorney who in turn files a “Petition to Partition.”

What Brenda has done is asked the Courts to sell the property, even if everyone else did not want the sale forced.   The courts assign a commissioner to sell the property, and they do it right on the courtroom stairs.  The court distributes the share of the profits to each co-tenant in relation to their ownership interests.

What is the difference in the two scenarios?  Well, when you place property up for sale and get all of the appropriate signatures it is much easier.   Your family splits the proceeds from sale at Market Price.  When Brenda files for a Petition to Partition, not only do you lose any potential equity, but you also lose cash money in hand.  Why?   When it is sold on the courtroom steps, it goes for 1/10th of a dollar on average – we call it fire sale prices.  Most of the people who bid on property on the steps are investors.

Once the Petition has been filed, the other owners commonly do not have any redress, which is method to stop it.   Once the commissioner says sold on the courthouse steps, the property is no longer yours, and if he gets $10,000 for a $200,000 property, your split is out of the $10,000, minus fees, filing fees, as well as the processing fees.  In the case of Brenda, she may be lucky and have a check for $1,000, but the drama is over and she can move on.