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Things you need to know about Estate Sale.
Selling a family property after the owner dies can be an emotional time for the parties involved. Sometimes heirs of the property are in a hurry to get rid of it and move on. There could be a number of reasons behind that, such as no emotional attachment to the property or large numbers on the bills for the property’s maintenance and upkeep. However, it is not necessarily an easy or quick process, and here’s why.
What is an Estate Sale and How does it Work?
An estate sale is the sale of a property of a recently expired owner with the purpose of liquidating the property and all the assets in it. Those who inherit the property will receive the proceeds from the sale. Although the most common reason for an estate sale is the death of the property owner. However, it may also occur because the owner will be moving or has moved to a new residence such as a retirement community or rest home, etc. where they will be incapable of keeping the property. That said, there are a number of reasons for the need of liquidating the owner’s property. For instance, the surviving family members with a stake in the property may have no interest in the personal belongings left behind by the owner, or they may be unable to reach a decision about what to do with the property. In such a case where this dispute may arise, the situation is resolved by the court. The court decides on the estate sale, after which the proceeds from it are divided among the parties involved.
When does an Estate Sale become a Probate Sale?
Many times, the sale of the property and the assets in it occurs when the owner dies without a will or naming any specific heirs. In such a situation, the estate sale becomes a probate sale wherein the court steps in assuming the responsibility of selling the property and appoints an estate representative who is responsible to handle the property sale.
Why Buyers Seek Out Probate Sales?
Probate Sales are mostly lifted below the market value. This is because the property is being sold in “as is” condition, which means that it likely has not been updated in a while and may need improvements with no guarantees about the condition. It is possible that the family members know nothing about any issues with the property that may reduce the value. This is why a home inspection is required and buyers should hire professional real estate agents to get the job done and get them the best deal.
Process Involved in a Probate Sale
The easiest way to identify probate sale properties is to work with a real estate agent who is familiar with such listings. The estate representative usually hires a real estate brokerage to market the property. If you decide to go look for a property on your own and like the property, you can contact the estate representative to find out the real estate agent handling the listing to get more information.
How long does Probate take?
- To fill the application – It takes some time to prepare the probate application properly, but if you are diligent, the application can usually be prepared and filed within days not weeks. We work with our clients to prepare and file as quickly as possible. Normally, we file within 1-2 weeks of first hearing from you.
- From application to grant – Once the application has been prepared and filed, it takes time for the Court to process the application. The amount of time required varies widely depending on the court where the application was filed. Applications in Toronto and the GTA usually take several months, with processing times ranging from 4-6 months currently. Applications in Ottawa are usually processed within 2 weeks. Processing times vary for other Courts. The application must be filed in the Court where the deceased resided, so unfortunately you cannot simply choose to file in a faster Court.
- To administer the estate – Administration of the estate after probate is in the hands of the estate trustee. The rough rule is that the executor has a year to administer the estate (for more, see estates law basics), however as it can take 4-6 months to receive a clearance certificate from Canada Revenue Agency, many estates extend beyond one year even if the estate trustee is very diligent.
When is Probate required?
Probate is not always required, but most estates should be probated. Probate is required when Court approval of the vesting of the assets of the deceased in the estate trustee is required – either to validate the will, or the choice of executor, and with respect to the executor, either because there may be a dispute about who it should be or because some beneficiaries are unable to consent on their own (for instance, people under disability including minors). Many estates of the first spouse to die or, which do not involve real estate or significant financial assets, do not need probate. If the estate includes real estate that does not automatically vest in someone like the spouse of the deceased, then probate will almost always be required.
Probate can sometimes be avoided for real property that has been held by the deceased for longer than 30 years. Known as the ‘first dealing exemption’ this is only available when the transfer is the first transfer into the land titles system when there is a valid last will, and the last will has not been probated. When this route is available, the real estate can be transferred directly into the names of the beneficiaries or estate trustees.
You cannot avoid probate just because:
- The estate is small
- All beneficiaries agree
- There is only one beneficiary
- The only assets are bank accounts or investments
If a financial institution (bank) where funds are held demands probate, then probate is required. Financial institutions are not obliged to waive probate under any circumstances. Some banks occasionally waive probate for small estates when there is no obvious conflict among beneficiaries. This is entirely at the discretion of the financial institution, and if they refuse in your circumstances the solution is not to argue – it is to probate immediately. If the financial institution agrees to waive probate, the beneficiaries will be obliged to sign indemnities, agreeing to indemnify the bank from any claims.
