Probate Process in Real Estate

PROBATE

Probate for Real Estate

Probate is one of the issues that comes up when people inherit a property. The process of probate can tie up the sale of an inherited property, and will prevent or delay any closing of any agreement to sell the home,  until this process has been completed. So what is “probate”?

Probate is a legal process triggered by the death of someone who owned property. Probate determines the validity of the last will and testament (or that there is no will) and the identity of the beneficiaries. If the person who passed away died without a will (intestate), then probate determines the identity of the heirs. Probate exists in both the U.S. and Canada, and although this article is being written from a Canadian perspective, the principles remain the same for both countries. In Canada, each province has differing rules on probate and each province has different specifications on what documentation is required as part of the probate process.

Typically when someone dies, and they have a will, there is a designated executor of the estate. The designated executor will usually hire a lawyer to facilitate guiding the estate through probate and the dispersion of assets.

Components of Probate

Probates have four main components: (1) the application process; (2) identifying and managing the assets; (3) paying off the debts of the estate, if any (4) distributing the balance to the beneficiaries.

Probates protect the interests of the estate’s beneficiaries and creditors by ensuring the orderly distribution of assets and payment of debts/expenses. Paperwork is typically filed by a lawyer, and court appearances may be required. Will probates can take 6 to 9 months or more to complete, and until the process is finished, you will be legally unable to sell the inherited house. If you accept an offer to sell an inherited property that is going through the probate process, it will not close on closing day, unless the probate has been completed.

Probate homes can be listed and sold, however,  provided that there is a clause included in the offer, that the sale is conditional of the successful completion of the probate process. Otherwise, if there is no such clause, or if the sellers fail to disclose that there is a probate in process, if there are delays in closing, there can be ramifications wherein the buyer seeks compensation.

There are ways that owners of real property can avoid the probate process before they die, saving their heirs a great deal of trouble. One such strategy is the Living Trust. A living trust is a  technique in which a trust is created while the owner is still living, and the real property is transferred into the name of the trust without giving up the possession or control of the property. When the person passes away, the home can be distributed directly to the beneficiaries named in the trust. Using this strategy, probate court is avoided.

There are other strategies to avoid the cost and time of the probate process, but these are legal matters, and anyone interested should check with an experienced real estate lawyer or accountant, for further advice.

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Toronto September 2013 Real Estate Market

September Shows Strong Sales and Rising Prices

The Toronto real estate market reported 7,411 residential sales processed through the Toronto MLS system in September 2013, representing a 30 per cent increase compared to 5,687 transactions reported in September 2012. So far this year, total resale residential sales in the Greater Toronto Area amounted to 68,907 properties sold during the first nine months of 2013 – a slight drop of  one per cent compared to the same period in 2012.
“It’s great news that households have found that the costs of home ownership, including mortgage payments, remain affordable. This is why the third quarter was characterized by renewed growth in home sales in the GTA. We expect to see real estate market sales up for the remainder of 2013, as the pent-up demand that resulted from stricter mortgage lending guidelines continues to be satisfied,” said Toronto Real Estate Board President Dianne Usher.
In the Greater Toronto Area, the real estate market showed an average selling price in the month of September of $533,797 – up by 6.5 per cent year-over-year. Through the first three quarters of 2013, the average selling price was $520,118 – up by over 4 per cent when compared to the first nine months of 2012.

Real Estate Market Trend

The MLS® Home Price Index composite benchmark for September was up by four per cent year-over-year. The annual rate of growth for the composite benchmark has been accelerating since the spring of 2013.
“The price growth story in September continued to be about strong demand for low-rise home types, coupled with a short supply of listings. Even with slower price growth and month-to-month volatility in the condo apartment market, overall annual price growth has been well above the rate of inflation this year. We expect that this scenario of continued growth and price appreciation will continue to play out in the local Toronto real estate market throughout the remainder of 2013, and we forecast that trend to continue into the next year.