If you have been left an inheritance by a friend or family member, you should be aware that the downturn in the real estate market will probably affect the amount that you stand to inherit and the amount of time it will take for you to receive your inheritance.

The vast majority of American probate estates contain one or more pieces of real property. Real property is developed or undeveloped land commonly known as “real estate.” All of the real and personal property in an estate must be sold before the estate can make a final distribution to the heirs. While the possibility of a preliminary distribution does exist, more and more prudent Personal Representatives are waiting until all of the real property is sold in order to avoid personal liability should a property sell for less than the appraised amount.

That brings us to the first potential delay. When a probate estate is opened, the Court will order an Inventory & Appraisal of all of the estate’s assets. As these appraisals age, they are less and less likely to portray a realistic sale price. In California, if the proposed sale price is less than 90% of the Court’s original appraised value, the attorney handling the estate will have to petition the court for a reappraisal of the property before the sale can be approved. This can add weeks or months to the already slow probate process.

This first delay would probably be welcomed by most heirs because it assumes that there has been an offer made to purchase the property! With the current glut of properties on the market and the increasing rates of foreclosure (even if good neighborhoods), offers to purchase are fewer and farther between! Real estate professionals across the nation will tell you that the current wave of foreclosures has added to the already high levels of market inventory. Increased inventory, coupled with a tightening of lending standards has lead to longer sales cycles.

When property values were rising, a typical probate estate would take between 9 to 12 months to close. These days, depending upon the market where the property is located, estates are taking 12 to 24 months to close and that is often only after reducing the listing price on the property several times in order to find a buyer.

If you are the person charged with administering the estate, it might be wise to remember the old maxim: a bird in hand is worth two in the bush. While it may not always be intelligent to “race to the bottom,” it still might be prudent to “lock in a number” and get the estate closed, even if it is for less than the heirs were hoping for. You don’t want to be forced to use phrases that contain the words “should’ve” or “could’ve” when explaining your decision to the heirs.

Tags: inheritance, real estate, real property

This entry was posted on Thursday, July 17th, 2008 at 12:42 am and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.