Improving real estate market helps thaw delays in closing estates

With the Central Pennsylvania real estate market moving again after the housing market crash of Melanie Walz Scaringi2008 and its aftermath, many heirs are hoping we are seeing the end of stalled housing sales that delay estate closures.

Yet the improving market doesn't guarantee a smooth sale for real estate that is part of a decedent's estate. There are many factors that influence real estate deals, and significant hurdles can stand in the way of a quick disposal of an estate's buildings, homes, time shares or land.

Attorney Melanie Walz Scaringi, who focuses on estate law at Scaringi & Scaringi P.C., discusses some of the real estate challenges that remain and some ways to help finally settle an estate.

"All the heirs want to get the estate closed as quickly as possible," Scaringi says. "Having any loose ends, such us unsold real estate, certainly slows the process. But the market is getting better. I have fewer estates stuck holding onto real estate. The housing market is not stagnant any longer, nothing like it was five, six years ago."

Still, this is not to say that every piece of real estate will cruise to closing in a timely manner.

Will an heir buy the property in question?

One work-around when the market is locked or a house just won't sell is for one of the heirs to buy the house. This enables the remainder of the estate to close in a timely fashion.

Many times, however, this option presents little incentive for an heir who considers buying the property (at a price based on its fair-market value) because he will bear all the risk and other beneficiaries will gain from the closing of the estate.

"When there are multiple heirs, the heirs often don't want to take the chance on having to unload the property themselves after the estate is settled," Scaringi says. "They prefer to have the estate take that risk, not them, so that all of the heirs share in the gains or losses of the sale. It is an unknown if they will be able to sell it for more money later. So it is hard to get an heir to take that kind of risk."

The idea of an heir distributing the real estate to himself is much more common when there's just one heir to the estate. "The heir could transfer the house to himself and then rent it until the market rebounds and the property value increases," Scaringi says. "That is a way around selling immediately."

The estate also could rent out an unsalable property. But the estate would remain open and would be required to file income tax returns on the rental income for each year that the property is rented.

"You really want to close the estate as quickly as you can," Scaringi says.

Acting fast to take advantage of the market

In today's improving market, Scaringi advises wasting little time in getting a house ready for sale. Listing it with a reputable real estate agent and setting the right price are key.

Even with the improving market, other issues might arise.

First, there is the season of the year. Winter can be a cold time for home sales. "Sometimes we wait to put properties on the market until the spring, when there are more buyers looking,'' Scaringi says.

Another issue is the condition of the house, which might especially be a problem if it was occupied by the same person over a long period of time and maintenance was allowed to slide. It falls to the executor to decide whether to put money into an out-of-date house in an effort to sell it.

When it's time to turn a property over to the taxman

In rare cases, an estate could own real estate that has absolutely no value. If that property is in Pennsylvania, the executor can give the property away (or transfer it for nominal consideration) and sign the deed using his authority as executor. But if the property is in Florida or another state where an ancillary estate administration is required for the Pennsylvania executor to sign a deed, the estate could end up spending more money on that ancillary administration than the property is worth.

"When we recognize that the ancillary estate administration will cost more than the property is worth, we may decide not to pay the real estate taxes on the property and let it be sold by the local sheriff at a tax sale. In that circumstance, the sheriff's sale will remove the property from the asset list of the decedent, and the estate can be closed without an ancillary estate administration," Scaringi says. "Obviously, this is not an everyday occurrence."

By and large, the real estate market is moving again

"For a couple of years, the housing market was stagnant and was saturated with houses for sale. Now it is beginning to adjust. We have a good amount of buyers again. For a while, all we had were sellers."

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