In Illinois, sellers are obligated to disclose known defects and problems with a property.
This law is in place to protect buyers from purchasing homes with serious defects unbeknownst to them, as well as the seller from becoming liable for known defects after the home is sold. It is also necessary to assure that the parties had the correct information in front of them when deciding on the purchase/sale price.
However, in the case of buying a home out of probate from an estate sale, the people involved in the sale may never have lived or even stepped foot in the home. As a result, there is no one living who knows of any defects. Additionally, there might also be issues with the heirs, depending on who is managing the estate. It could be a Trustee, a successor Trustee, an Executor, a single heir or group of heirs.
Here we look at each of these roles and how a real estate attorney helps ensure a smooth sale.
What is a Successor Trustee?
A Trustee has title to trust assets but does not own those assets.
A trust is a legal entity managed by a Trustee which is responsible for administering that trust based on the terms of the will. Besides acting as a fiduciary, their role is to ensure the heirs benefit from proper management. If, for some reason, the Trustee is unable to fulfill their duties because they are deceased, incapacitated, or for other reasons, a successor Trustee must be assigned to step in. This can be a person or institution.
Regardless of whether it is a Trustee or successor Trustee, they have a fiduciary duty to adhere to the terms of the trust.
What is a Successor Executor?
An Executor of an estate is the person named in a will to represent the deceased during probate or independent administration when the deceased person’s property is distributed. As with a successor Trustee, if the Executor is unable to fulfill their duties, a successor Executor steps in.
How are Successors Assigned?
Successors are assigned either by the decedent in their wills, by a court, or in some cases by the heirs/beneficiaries of the will.
Risks of Buying a Home Subject to Probate
Although your clients can often find a bargain when purchasing a property out of probate, a good inspector, insurance agent, and the real estate attorney are critical to the due diligence regarding the condition of the property.
Because the current owners might not be aware of issues—and therefore have no obligation to disclose problems—buyers can’t bring a suit for failure to properly disclose against a Trustee or Executory who was unaware of the condition of the property.
It is critical, therefore, that the inspection be as thorough as possible, that the insurance agent pull a C.L.U.E (Comprehensive Loss Underwriting Exchange) report to determine prior claims and that the attorney check things like public notices about building code violations or building permits that had been pulled. More than once, I have seen a finished basement flood because the walls covered cracks in the foundation hidden behind the renovations. If the Trustee or Executor has no knowledge, and the inspector does not uncover a problem, the only solution for the buyer is to make an insurance claim.
A real estate lawyer can research any potential issues with the property so that the buyer can have a sense of the repair costs they may be facing and be sure that those costs are factored into the purchase price of the property.
Property Heirship and Buying a Decedent Property
One final concern is the heirship of the person who passed away.
There are a number of possible means of dealing with property of a decedent:
- Probating a Will
- Deeding out from a Trust
- Providing an Affidavit of Heirship
- Use of a Transfer on Death Instrument
- Transfer by a joint tenant. Because the seller’s attorney usually has to clear the title issues related to how a decedent’s property is to transfer, it is incumbent on the attorney to know how the property will be transferred.
But it is also important that the Buyer’s attorney know how title is being transferred. The fact that the owner of the property is deceased and the fact that the party or entity selling the property did not reside in the property does not necessarily mean that they have no knowledge of the condition of the property. Consider whether the seller is a child who would have visited Mom during her decline. If a C.L.U.E report indicates substantial payment for water damage, is it likely that the family member who is now the seller of the property knew that there were tens of thousands of dollars in repairs that were completed?
The problem with Failure to Disclose litigation is that the buyer has to prove that the seller had knowledge. In addition, most estate sales are “as is”, which means the buyer either accepts the condition of the property or terminates the contract (unless the brokers can negotiate a better price). This is where leveraging a real estate attorney is critical because a good Attorney Review letter can dig deeper than the Disclosure Report may by asking questions about knowledge of past problems and is critical to assuring that the buyer is made aware of past damage so as to properly evaluate their purchase.
Sorting out the details of estate property purchases falls in the purview of experienced real estate attorneys. Your clients should leave nothing to chance.