Many real estate transactions represent a major milestone or exciting new beginning. Unfortunately, not every home sale is a happy occasion, as we see during estate sales. This is when loved ones are tasked with selling the home of a deceased relative, often a parent or grandparent.
Estate planning is an uncomfortable conversation that we are all tempted to put off for another time. However, early planning and knowing what to do in advance are key to getting through it. If you’re the Executor selling the home on behalf of someone you loved, a little guidance and direction will be invaluable. If you have children or grandchildren, making arrangements now will save them unnecessary heartache when that moment arrives. In this post, we’ll provide a guide to handling an estate sale.
Estate sales can be particularly challenging, which is why we’ve created a downloadable guide to help you through the process. Get your copy for free right here.
The Role of the Executor
First things first, an estate sale requires an Executor. Whether someone is asking you to fulfill this role or you’re looking for an Executor for your estate, this is a significant responsibility.
The Executor has many duties, but their primary function is to ensure that the deceased’s estate is settled according to their wishes. Considering the scope of the responsibility, the choice of Executor is critical.
You should always consider your options and choose someone you trust completely and who also has the skills required to fulfill the role sufficiently. If someone asks you to be their Executor, it’s important to understand that you have the right to say “no.” You should only agree if you are confident you will be able to handle the task.
Understanding Probate
If the deceased owned real estate, selling the home is one of the Executor’s many responsibilities. Before ownership of the property can change hands, you first have to go through probate.
This means applying to the courts to grant you permission to sell the house on behalf of the deceased. Whether there’s a Will or not, real estate will need to go through probate unless it is held in joint tenancy with right of survivorship. If the property is owned as tenants in common, probate will still be required.
A clear and valid Will can speed up the process. However, probate can still take time due to a backlog with the courts. In most cases, it’s in everyone’s best interest for the Executor to apply for probate as early as possible. You can find more detailed information as well as all forms required on the Ontario website.
Do you need to learn more about the legalities of selling real estate? The posts below might be a good place to start:
- How to Sell Your Parents’ Home
- Common Clauses & Conditions in Real Estate
- Downsizing & POA: A Must-Have Conversation
Preliminary Selling Steps
The technical details of an estate sale are similar to a regular real estate transaction. Both will require thorough decluttering before putting the home on the market. The main difference is in the scope of this project. In a typical transaction, the homeowner plans on bringing most of their belongings with them.
With an estate sale, you need to remove everything from the house. Anything with financial value is part of the estate and should be distributed according to the Will. This could include jewellery, artwork, musical instruments, antiques, high-end electronics, or even vehicles. It can be difficult to think of everything, so the Will would also need instructions for anything not specifically mentioned.
As you can imagine, estate planning gets complicated, especially when items have both sentimental and monetary value. For example, imagine you have a piano that is worth $1,000. Dollar value aside, it makes sense that you would want it to go to a beneficiary who is musically inclined and will spend many happy hours playing their favourite songs. Another family member might want it only so they can liquidate it to buy something else. Either way, there could be some tension unless the deceased has made their wishes clear.
These are some of the reasons why you should always sit down with your family members and an experienced lawyer to better understand who gets what – and why. Often, it’s about far more than money.
Preparing and Staging the Home
Liquidating and decluttering all of the deceased’s belongings from the home will likely be your biggest challenge during an estate sale, both practically and emotionally. Once that task is complete, you can move on to the next steps.
Again, an estate sale is similar to a regular transaction. The goal is to earn the best price possible so that the Executor can disburse the assets to the beneficiaries. Typically, a fast sale is also desirable so that all loved ones can move on with the grieving and healing process.
The difference now is that the Executor likely has less time to make any repairs that could maximize the value of the sale. You may need to compromise by focusing on the minor updates that will have the most impact. Alternatively, you can outsource much of the work to make the house appealing to potential buyers. Working with a full-service real estate team can ease the burden significantly by bringing in experienced tradespeople to perform all necessary updates, such as painting and staging.
From here, the selling process is mostly the same. And the posts below can help you achieve the results you want with as little effort as possible:
- Renovating Vs. Selling Your Home As-Is
- 5 Quick Updates That Add Resale Value
- What Are the Worst Mistakes When Selling Your House?
Will There Be Capital Gains?
Capital gains are a sensitive topic, especially given the recent changes in the tax amount. It can also be complicated, and we recommend working with an experienced lawyer and tax advisor to ensure all the i’s are dotted and t’s are crossed.
Fortunately, however, Canada does not have an inheritance tax. Whether or not the home will be subjected to capital gains depends on whether it was the deceased’s primary residence or an investment property. Investment properties or vacation homes will be subjected to capital gains, but primary residences are exempt at the time of death.
However, at this point, it can get tricky. If the Executor later sells the property for more than the house was valued at the time of death, capital gains will apply on the increase. However, keep in mind that any eligible selling expenses, such as legal and real estate fees, could help to reduce the taxable amount.
Settling the Estate
After probate is granted and the Executor has accepted an offer, the closing process can begin. As the Executor, it’s also your responsibility to maintain and care for the home so you can turn it over in the same condition as when the buyer placed the offer.
During this time, a good real estate agent and lawyer are also essential to ensure a seamless close. Once the transfer of the title takes place, the estate will receive the funds from the sale. After settling any outstanding debts, taxes, and estate expenses, you can complete your duty and disburse the proceeds to the beneficiaries.
You may still have your own grief to work through as you go through your own healing journey. However, you can take comfort in knowing that you have honoured your loved one’s legacy and wishes.
Do you want professional guidance to help you with an estate sale? Our experienced and compassionate Guelph real estate agents can help you through the process. Reach out today at info@gowylde.ca or call 519-826-7109 to learn more about our services.
