A Mortgage, Carrying Costs & Real Estate Professionals
Often, in a probate case, the Decedent’s residence has to be sold. If the mortgage on the property is large compared to the value of the house and if it takes a long time to sell the house, the monthly mortgage payments (or charges against the sale if the mortgage isn’t paid), property taxes, utility bills, HOA fees etc. can eat up a large part of the estate.
Hiring A Realtor
Most Executors or Administrators (usually a relative of the Decedent who has the duty to sell estate assets) hires a realtor to sell the house or condo. Typically, when real estate is listed, 3% of the sale goes to the listing agent and 3% to the selling agent. Often there is an additional fee, say of $695. (Upon request we can refer you to a successful realtor who offers clients of our firm a discount off this rate.)
Choosing An Experienced Realtor
There are a vast number of licensed realtors however, it is ideal to have someone who is successfully being a realtor as a career rather than individuals, including family members, that may only do it on the side. If the market is red hot the latter may be reasonable but when the real estate market is not red hot, the successful full-time realtors will naturally steer their prospective buyers to the properties they have listed so they can make 6% on the sale rather than 3%.
In addition, the successful realtor who closes on several properties each month has experience with all sort of problems that may arise at closing and is more likely to be able to save a troubled closing that the realtor whose closes on one or two properties a year.
Example Scenario:
In one scenario the personal representative hired his friend who was a new realtor. The house was listed, for say, $300,000 and a contract to purchase signed for that price, or so it appeared. Then the appraiser, possibly hired by the buyer, came up with an appraisal for $285,000 and the buyer was only willing to offer that. Also it turned out that the seller's broker had agreed that the seller would pick up $3,000 of the buyer's closing costs. So now the buyer was offering $18,000 less than agreed upon. This house was being sold in a process not requiring court approval but requiring notice to all interested parties. The personal representative wanted to go ahead with the lower price. This required a new notice period and increased the chances that someone getting some of the house proceeds would file an objection. The more experienced a realtor is, the less chance that something like this will happen. A good realtor will be able to advise his client of what a house will appraise for. (In fairness, sometimes the housing market has a large monthly decline that could affect appraisals.)
Finally, a successful experienced realtor has a network of competent trade and service people who can be hired at a reasonable price to do any necessary work to make the property more attractive to potential buyers or who can fix any problems that crop up when the buyer hires a home inspector to inspect the house for defects prior to closing. For example, an out of state executor hiring a realtor can expect the realtor to hire people to remove trash from the house, fix-it up, and fix any problems showing up during an inspection. A realtor who is not a full-time realtor may not have a list of reliable and cost-effective people to do these jobs.