The estate wants to close before the creditor window shuts, and title doesn't

Question

Sitting on a signed deal where the personal representative wants to close in three weeks. The claim period for creditors in that state hasn't run out, and the title company came back saying they'd want either a holdback or a delay before they'd write the policy the way I wanted it.

The estate's argument is reasonable. They're paying utilities and insurance on an empty house, the heirs are out of state, and there's a mortgage still accruing. Waiting out the remaining weeks costs them real money and nobody has filed a claim.

My side of it is that closing before the period ends is a bet on nothing showing up late, and the things that show up late in these files are medical, tax, or a lien nobody in the family knew about. The mechanics of how a claim reaches the property after a sale, and whether the buyer or the estate carries it, depend on the state's probate code and on what the court's order actually says, so this is a question for a probate attorney in that state rather than a forum rule of thumb.

The three practical paths I see: close now and rely on title insurance plus whatever indemnity the PR will sign, close now with a chunk of the proceeds held in escrow until the period ends, or just wait and offer to cover carrying costs so the estate isn't punished for it. The escrow option is the one everybody names and the one that keeps dying in negotiation, because the heirs want their money.

Which way do you actually go when the seller is bleeding $1,400 a month waiting?

devon_pierce · Answer

I'd pay the carry. Fourteen hundred a month for maybe six weeks is $2,100, and on any deal worth doing that's noise against the size of a surprise lien. It also reads well to the heirs, which is the part I care about while I'm still building a name in probate.

Where I'd push back on my own answer is if the remaining window is long. Some states run months, and paying carry on a house you don't own for four months isn't insurance, it's just spending.

tonyv88 · Answer

Nobody's mentioned the vacant house itself. Six more weeks empty in the wrong neighborhood and you're buying a different property than the one you inspected, and the estate's insurance on a vacant dwelling may not cover what the heirs assume it covers.

If I'm waiting, I want the utilities on, somebody driving by weekly, and a written okay to change the locks at closing rather than three sets of keys floating around the family. I manage a probate flip for an owner who skipped that step and we found a squatter and $9,000 of copper damage. He'd saved himself a $3,000 escrow argument.

nataliehsu · Answer

The escrow keeps dying because you're asking the heirs to accept a worse outcome than they were promised, and nobody explained the escrow to them before the number got into their heads. Same problem as the retail conversation.

If the PR raised it at the start as a normal part of estate sales, it lands differently. Introduced in week three it sounds like the buyer got nervous.

tashaford30 · Answer

Read the indemnity before you decide anything. A personal representative signing an indemnity in their representative capacity may be promising you the estate's money, and after distribution the estate has no money, which makes the document decoration. A personal indemnity from an individual heir is a different instrument and most of them won't sign one.

So the choice is really between the escrow, which is enforceable and unpopular, and waiting, which is expensive and safe. I'd vote escrow and be willing to lose the deal over it, though what the title policy will and won't cover here varies by state and by insurer, and that's a conversation to have in writing with the underwriter and a probate attorney before you pick.

The estate wants to close before the creditor window shuts, and title doesn't

4 replies