Special Considerations when Purchasing New Jersey Real Estate from an Estate
In addition to the usual issues which come up when you are purchasing real estate, such as the contract review, home inspections, negotiations, and applying for a mortgage if necessary, when you purchase real estate from an estate there are some additional concerns.
When the owner of the property has died prior to entering into a contract of sale, and the property is being sold by an estate, the first question is: Who has the power to sell the property?
The person who has the power to enter into a contract for sale is usually the executor. If the deceased owner had a will and the property is passing with the residuary estate, (the residuary estate is what is left after specific bequests), the executor can do everything needed to effectuate the sale. It will be necessary during the contract period to obtain the death certificate, a copy of the will and the letters testamentary (the document from the surrogate’s court appointing the executor). The buyer’s attorney should insist that these documents are provided within a short time period after the contract is finalized.
However, if you obtain a copy of the will and see that the property passes by specific bequest to specific named beneficiaries, then not only does the executor need to be involved in the sale, but also under the New Jersey Real Estate law the beneficiaries must join in the sale. This can only be determined by seeing a copy of the probated will. When real estate is devised by specific bequest, it can create significant delays as the beneficiaries may be scattered throughout country, or even out of the country. In this case, the beneficiaries must all agree to sell real property on the terms and conditions in the contract, they must all agree to the resolution of any issues throughout the contract period, including home inspection negotiations. The seller’s attorney will need to seek the consent of each beneficiary for attorney review changes, home inspection repairs requests, etc. Each of the specific bequest beneficiaries must also execute the closing documents. Clearly, a purchase is more difficult if there is a specific bequest of real estate. However, if the buyer is represented by an attorney who understands the issues involved, these issues can be effectively managed.
Additionally, if title to the property is held by two individuals as joint tenants, and one of the joint tenants had died prior to the death of the current seller, it also be necessary to obtain the death certificates of both individuals. This can be more difficult than it sounds. In New Jersey, a person entitled to obtain a death certificate must request from the New Jersey Department of Vital Statistics. Unless an expedited request is submitted and paid for, it takes six to eight weeks for the State of New Jersey to process the request. Expedited requests are supposed to be provided within ten days. However, if often takes longer. Moreover, If there is any error in the requesting documents, then the request must be resubmitted starting the time periods running anew. It may also be necessary to obtain the will and letters testamentary for that joint tenant.
The second important question is: Will there be a lien against the property?
When you purchase property, you will hire a title company to do a title search. When the seller is deceased, the Title company will require many items before issuing a title insurance including: a completed estate questionnaire; death certificate; letters testamentary; last will and testament; copies of New Jersey Estate and New Jersey Inheritance tax returns if prepared and Federal form 706, if required to be filed; an Inheritance tax waiver must be filed with county clerk or escrow held (this can be a significant amount). The title company must insure that the buyer is protected because if taxes are due to the State of New Jersey and/or the IRS a lien attaches to the property of the decedent and the property can be taken by the state of federal government to be sold and pay the liens.
The attorneys at McLaughlin & Nardi are well versed in the interplay between New Jersey estate administration law and New Jersey real estate transactional law. If you are considering purchasing real estate from an estate, it is important to be represented by an experienced real estate attorney who understands what must be done to protect your interests. Call us at (973) 890-0004 or by e-mail to find out how we can ensure that your real estate transaction goes smoothly in a timely manner.