If you have access to a property that’s been held in a trust for a lengthy period of time but want to sell this property, there are several challenges you’ll likely encounter before you can close on the transaction. The sale of a trust property usually takes place soon after the owner has passed away.
The trustee who was put in charge of the account typically needs to be contacted to start the home-selling process. This individual can give you all the information you need to go through with the sale. There’s also a possibility that the rules for the decedent’s trust state that the trustee needs to give approval before the home can be sold.
Even though the home-selling process for a trust property is similar to the process used in a more traditional sale, making a single mistake could result in the transaction being derailed. The following provides some tips and recommendations on how to effectively sell a trust property in Los Angeles.
How to Sell Trust Property in Los Angeles, California
Trust properties are any properties that fall under a trust, which is a legal document that determines what happens to properties and assets once the owner passes away. Trusts will name two legal parties that are considered integral to the real estate brokerage process, which include the beneficiary who receives the property or asset and the trustee who manages the trust. The beneficiary and trustee need to cooperate if they want to effectively sell or purchase trust property.
The Trust Real Estate Sales Process
The process that’s required to sell trust real estate is almost the same as the standard home-selling process. However, there are a couple of additional steps you must take. There are two options you can use when selling trust real estate, which include selling with a trustee and selling without a trustee. Each process differs slightly from the other.
How to Sell Trust Property With the Trustee
Selling your trust property with a trustee is somewhat easier than doing so without one. During this process, the trustee who manages the account will sell the property to a third-party buyer. The funds from this sale will then move to the trust. The numerous steps that occurs when selling with a trustee include:
- The first step involves reviewing all trust documents to make sure that the trustee can sell this property. You should be able to find this statement in the trust paperwork. Even if it’s not there, the majority of courts provide the trustee with the ability to perform this transaction unless the documents forbid it.
- Once the right to sell has been confirmed, you should hire a reputable real estate agent who can manage the entire process.
- Closing the sale will require proof that the trust account is currently valid and that the trustee still has the right to conduct the sale of the property. In most cases, this will require a Certification of Trust, which must be signed directly by a trust attorney. Make sure that you also have a tax ID number and death certificate for the trust’s creator.
- The sale can now be closed as long as the buyer, beneficiary, and trustee agree on the asking price.
- Once the sale has been finalized, the earnings will be sent to the trust and can be provided to the beneficiary or moved to an account.
How to Sell Trust Property Without the Trustee
If you opt to sell without the trustee, this process involves:
- Make sure that you review all trust documentation to ensure that no clauses remain that prevent trustees from sending the property’s title to the trust’s beneficiary. The transfer should be able to take place unless it’s expressly forbidden in the documentation.
- In the event that the transfer of this property is allowed by law, it’s still possible for the trustee to disallow the transfer. They are in control of this trust and have the authority to approve or disapprove.
- If the transfer is approved by the trustee, this individual must fill out and file a deed form. The form should be submitted to the nearby property office, which makes the transfer official.
- After the transfer is done, the beneficiary will own this property and will have the option to hire an agent who can list it on the market.
Tips For Trusting Properties
Before going through with the sale of your trust property, there are some basic tips and suggestions that you might want to keep in mind.
Tip #1: Understand the Sale Process Specific to the Property
First, make sure that you understand what the sale process entails for the specific type of property you wish to sell. Some trust and probate sales require a court confirmation or written approval that’s provided by the estate or trust beneficiaries. Other trust sales will fall under the purview of the trustee, which means that you won’t be able to take part in the sale of the property.
Tip #2: Don’t Expect an Off-market Sale
Certain rules and regulations apply to trust property that the trustee must abide by. For one, they are usually required to sell the property at or above its current market value. They are also expected to field numerous competitive offers and list the property on the market. If the property is a piece of land or residential home, it needs to be listed on the local MLS. While it’s possible that you or the trustee will receive offers from off-market buyers, most trustees automatically ignore these offers until the property has been listed.
Tip #3: Don’t Expect Discounts
You also shouldn’t expect there to be any discounts on the property unless the local real estate market isn’t doing too well. As mentioned above, trustees are financially responsible for managing assets wisely, which means that the properties they sell should obtain market value prices when the market is healthy. In the event that the property requires some repairs and cleaning, the trust typically performs the necessary renovations as long as the investment is fully recouped with the sale.
There are, however, two scenarios that could result in a discount. If the estate doesn’t have the amount of cash it needs to properly repair the property so that it meets market standards, they would need to adjust the price lower or provide the buyer with credits to make sure it’s sold and doesn’t remain on the market for too long. The price might also be lowered when the estate doesn’t have enough cash to continue paying for ongoing expenses.
If you find yourself in this situation as the seller, you might receive offers from buyers that are slightly lower than the market price but contain pass-through deposits or multiple earnest money deposits. With these funds in hand, maintaining property expenses until the transaction is closed would be considerably easier.
Tip #4: Expect a Longer Review Period on Your Offer
While many trustees have the sole authority to perform property sales for the trust that they manage, they usually don’t accept offers without first consulting with family members or beneficiaries. The beneficiaries who will obtain these assets once the probate process comes to an end typically want to look at all offers to give approval.
While this approval isn’t legally required, it does help to keep the peace among family members and beneficiaries. If you have a trustee who’s managing the sale of a trust property, make sure that you have your attorneys review the process before the home is placed on the market and before any offer is accepted. Keep in mind that reviewing this documentation can take days and might result in the home-selling process being delayed.
Tip #5: “As-is” Is a Variable Absolute
Unlike most real estate transactions, trustees don’t need to provide some disclosures when selling a piece of real estate. If the home that’s being sold is in California, every property that’s being sold in probate is labeled in “as-is” condition. If, however, you have personal knowledge about issues with your property, it should be disclosed to potential buyers.
The trustee may have never viewed the property beforehand and likely wouldn’t know about a malfunctioning HVAC system or major foundation issue. On the other hand, the trustee should still know if any litigation is pending about the property or the owner’s estate. This information must be disclosed by the trustee.
Many trustees will rely on the property details and disclosures that the listing agent provides as well as the information that’s found in the inspector’s report. Because of these issues, some buyers may be wary about making a final offer on the home. You can ease these concerns by disclosing any problem you’ve encountered with the property and its current condition.
Selling a trust property in Los Angeles can be a time-consuming process whether you’re handling it on your own or the process is being managed by the trustee. The steps detailed above should guide you through this process regardless of which option you prefer.