From the desk:Probate Real Estate Investing

Assignment of contract where the seller is an estate and the PR's letters may be restricted

Reading a purchase agreement my buddy sent over for a second set of eyes and I've got a clause problem I can't resolve from the document alone.

Setup: estate is the seller, PR signed, contract has a standard assignment clause allowing the buyer to assign without seller consent. Price 96, buyer intends to assign at 106. Property is a townhouse in a decent suburban market, ARV maybe 175 with 40 of work, so the numbers are not the issue.

Two things in the file bother me.

First, the letters attached to the file appear to have a limitation on them regarding the sale of real property. I'm reading language that suggests court approval is needed for a conveyance, but the contract has no contingency for that, no reference to a court order, nothing that makes the closing conditional on approval being obtained. The contract reads as if the PR is an ordinary seller with full authority. Whether those letters actually restrict this sale is a state law question and an attorney in that state has to answer it, I'm just noting the document doesn't address it either way.

Second, and this is the part I want other eyes on: if court approval is required and the court is approving a sale at 96 to a named buyer, what happens when the named buyer at closing is a different entity because the contract got assigned? Does an approval attach to the price, the person, or both? I've read that in some places the petition names the purchaser specifically. If it does, an assignment could require going back for a second approval, which would blow the timeline, and the assignment fee is now visible to a judge and possibly to the heirs.

The practical question in front of me is what I tell my buddy. Options as I see them: add a court approval contingency and an outside date and accept that it slows everything, or restructure so he closes in his own name with a double close instead of assigning, which costs him two sets of closing fees and requires funding he'd rather not use.

There's a third possibility I keep chewing on, which is that the PR doesn't know the letters are restricted and the title company will catch it three days before closing, and then everybody is scrambling. Which is maybe an argument for calling the estate's attorney directly this week instead of waiting.

What would you add to the contract, and has anyone dealt with an approval that named a specific purchaser?

Answer

2stephen_ok9CO2CPRO6

Call the estate's attorney this week. Everything else in your post is downstream of what that person says, and they have every incentive to tell you, because a failed closing is more work for them than a phone call.

On the assignment question, the reason I'd lean toward the double close even at the cost of two closing fees is the visibility issue you raised. If the fee is sitting in a court file where an heir can read it, you've created a reason for someone to object to a sale that was otherwise going through. That's not a legal risk exactly, it's a human one, and human objections in probate cost months.

The part I'd want your buddy to answer before any of this: does he have the funds to double close or is he counting on a transactional lender? Because that changes whether option two is even available to him, and if it isn't, the contingency route is the only one and the timeline conversation happens now rather than in week six.

2 replies

0derekj19SB1B

Curious about the mechanics from the other side. If the PR genuinely doesn't know the letters are limited, is the estate's attorney the person who should have told them, and would that attorney be annoyed or relieved to get your call? I'd assume relieved but I've noticed people in this business often don't want to hear from a buyer's side directly.