In NYC real estate, an estate sale refers to a property that is being sold after the death of its original owner (the deceased). Some people also include real estate properties that are on the market when their owners permanently move to a facility due to old age, which implies that they are unable to care for their properties.
The individual or entity (a trust, law firm, etc.) responsible for the estate sale (on behalf of the deceased) is called an executor, or sometimes an executrix if the person is female. If there is an authentic will, the executor is the person or persons present in the will (appointed by the deceased).
If there isn’t a will present, a surrogate’s court will assign an executor who may or may not be decedents, family members, or heirs of the deceased. When the state takes possession of the property because there is no will present and sells it, it’s called a probate sale.
It’s important to note that the word estate sale doesn’t exclusively refer to real property or co-op apartments. It includes everything that the deceased owns.
Most estate sales are in “as-is” condition, which means that the property is being sold without any renovations and final touches made. Some of these properties haven’t been renovated for years or even decades. This is, sometimes, referred to as “estate condition” and may be used to describe other properties that are not technically estate sales.
Some people also include properties that are being sold by the bank because the owner defaulted on their payments in the definition of estate sales.
Estate Sale vs. Regular Sale – Main Differences
An estate sale differs from a regular sale in several ways, including:
A property in an estate sale can be significantly discounted compared to similar properties in the area. That’s because there is usually less interest in such properties, partly because of their association with a recent death and partly because most such properties are sold as-is and are often in need of costly renovations. However, in New York City, most condos and co-ops are sold in as-is condition.
Legal Issues And Liens
An estate sale may have more legal complications than a regular real estate sale. There may be issues with unpaid estate tax (enforced by the state of NY) or federal inheritance tax complications (the two are different). There may be liens that can make the title of the property unclean. If it’s a larger property with tenants, their complaints and issues that might arise between the death of the owner and when the sale is made can also result in legal complications that can slow the sale down.
An ideal estate sale, where an executor is present, and the buyer understands the problems associated with buying a property in estate condition, may not take much time at closing. But if there are extensive renovations required before the buyer can move in, it usually costs more time than a regular sale. But there are other factors that can extend the timeline significantly longer:
- An unclean title
- A contested will
- Missing property documents (including lien and tax documents)
- Inheritance tax problems and negotiations with IRS
These delays can also cause problems with the mortgage loan.
With more legal complications and more time required to sort them out, the attorney fees can be significantly higher than what they are in a regular sale.
In an estate sale, the executor may be interested in the sale going through as soon as possible and may not agree to some contingencies common in a typical sale.
The “as-is” condition of the property in an estate sale is mostly a con but, in some cases, a pro for the buyer:
- The con is the additional cost and time needed to make the property habitable. Since buyers are allowed an inspection, they should use it to get as accurate an estimate of the repairs needed as possible, so they know the price they are paying is worth it.
- The pro is that you can sometimes get more character than a regular, modern building. Also, if extensive renovations are planned/necessary anyway, the buyer can shape the property however they like.
Investors and developers are often more interested in estate sales (since they have the skills and resources to turn the property around) than regular buyers, but co-op boards may discourage investors depending on the circumstances.