Aug 16, 2024 | Uncategorized
A brief summary By: Mark Jones, Esq., Associate Senior Underwriting Counsel Stewart Title Company
A common question that comes up in underwriting title insurance is how do we take title from the estate of a deceased person? There are typically three main ways that we can accept a title from an estate: (1) by License to Sell issued by the Probate Court; (2) by Power of Sale under an allowed Will; or (3) by a deed from the heirs at law or devisees in a Will. It is important to remember, however, that depending on which method is used to pass title, other claims or liens which impact title may need to be addressed in order for a policy to issue without exception.
Decree of Sale of Real Estate by Personal Representative (License to Sell)
There are a couple variations in the types of Licenses to Sell, but the end result for each is that the estate sells free and clear of any liens that would otherwise attach to the estate. Instead, those liens would attach to the proceeds of the sale. These liens include the automatic lien for administrative expenses, any creditor’s claims filed in the probate court (creditors have one year after death to assert claims), and any MassHealth liens filed with the probate court. Keep in mind, any liens that encumbered the real estate prior to death, such as a mortgage, still require a discharge. Also, a license does not eliminate the need to deal with Federal and Massachusetts Estate Taxes. Releases of estate taxes from both the IRS and DOR or an appropriate affidavit must be obtained and recorded at the Registry of Deeds.
The typical license we see is a general license to sell by the Personal Representative (“PR”) in the estate. A PR would file with the court a Petition for the Sale of Real Estate in order to receive permission to sell. This is a license under G.L. c. 202, section 19 and the court will only allow the petition if it is filed within one year of the allowance of the PR’s bond. The license must be used within one year of issuance. The terms of the license must be scrupulously followed. Most importantly, the sale price must be for the same amount or more than set forth in the license. My personal preference, and the best practice, is to have the license recorded along with the deed to make life easier on future title examiners but it is sufficient that the decree is only docketed in the probate case.
Power of Sale in a Will
Taking a deed under Power of Sale in a Will is similar to a deed under a License to Sell in that any liens against the estate would attach to the proceeds of the sale. Again, releases of estate tax liens or estate tax affidavits must be recorded at the Registry of Deeds. In order to take a deed from a PR, the Will must contain a Power of Sale, the Will must be allowed by the court, and the PR must be appointed by the court. The Power of Sale must be closely reviewed to confirm that the power to sell includes real estate and that there are no other conditions tied to the PR’s power to sell. A PR is a fiduciary and therefore is bound by both statutory and common law fiduciary duties. For this reason, a deed from a PR that is for nominal consideration is problematic and may not be insurable. It is important to remember that a PR’s ability to sell under Power of Sale in a Will is not limited to time and not only cuts off claims of creditors but also all claims of legatees and devisees. The PR’s powers, however, are not indefinite. Specifically, if an Order of Complete Settlement is issued or the PR files a closing statement, the Personal Representative no longer has the ability to sell the real estate.
Deed from Devisees in a Will or Heirs at Law
Unlike deeds under Licenses to Sell and Power of Sale in a Will, any claims or liens filed in the probate court against the estate will have to be released or satisfied before we can insure a title given by devisees in a Will or heirs at law. One of the first and critical steps in determining whether title can be insured by such a deed, is establishing the identity of the devisees or heirs at law. Prior to the adoption of the MUPC, it wasn’t always easy to identify the devisees of a decedent if the will broadly identified individuals by group, rather than by name; however, with the adoption of the MUPC, the forms that are filed as part of a petition provide detailed information on devisees. In situations where a decedent died testate, and the devisees are clearly established in the probate filing, the devisees can convey the real estate; however, that conveyance is subject to divestment by the PR if the PR seeks to sell the property in order to completely administer the estate. Property conveyed by devisees is also subject to claims for the administration of the estate for a period of six years after the approval of the PR’s bond. To insure the title, we would generally require that the probate be closed with an order of complete settlement. This eliminates the potential for divesture by a PR and eliminates the potential for claims arising out of the administration of the estate.
If the decedent died intestate, unless the probate petition is filed as a formal proceeding, there is no determination of heirs and one cannot immediately rely on the filed forms to establish the heirs at law from a title perspective. For this reason, deeds from heirs in an informal proceeding may not be immediately insurable. If an informal probate has been filed for a decedent that died intestate and a PR has been appointed, it will generally be necessary for the PR to file a petition for an order of complete settlement that includes a specific request to determine the heirs. Once allowed, title conveyed from the heirs will be insurable.
As you can see, taking title from devisees or heirs at law can be far more complicated than taking title from a PR who has obtained a license or has been permitted to sell by the terms of the Will. Should you have questions on how to transfer title so that it is insurable when there is a probate involved, don’t hesitate to reach out to any member of our underwriting team. We will work with you to determine the best and easiest path to insurability.
The probate court provides links to many of the probate related forms, along with instructions for completion. To view, follow this link: https://www.mass.gov/lists/probate-and-family-court-forms-for-wills-estates-and-trusts
Apr 10, 2024 | Uncategorized
By: Rhonda Duddy, Esq., Massachusetts and New Hampshire Underwriting Counsel, Stewart Title
The recently proposed NAR settlement comes after several years of litigation. The plaintiffs in the lawsuits are home sellers alleging that NAR and other organizations participated in a conspiracy to raise, fix, maintain, or stabilize real estate commissions in violation of Section 1 of the Sherman Act and corresponding state law.
In 2023 the jury awarded the plaintiffs $1.8 billion. Although NAR denies the allegations, they announced on March 15, 2024 that they wished to settle the matter rather than move forward with an appeal. Defendants Keller Williams, RE/MAX and Anywhere Real Estate settled earlier this year. The sole remaining defendant is Home Services of America.
The total monetary settlement amount that NAR has proposed is $418 million, broken down as follows:
Within 30 days following the filing of the first motion for preliminary approval of the Settlement Agreement, NAR will deposit $5 million into escrow; within 90 days following final approval of the Settlement Agreement, NAR will deposit $197 million into escrow; no later than 1 year after the initial $197 million payment, NAR will deposit $72 million in principal, and no later than 2 years after the initial $197 million NAR will deposit another $72 million in principal. No later than 3 years after the initial $197 million payment, NAR will deposit into escrow the remaining principal, along with interest on each of the installment payments. The obligation to make these installments will be evidenced by a promissory note.
The practice changes NAR has proposed to implement are primarily outlined in Paragraph 58 of the 108-page Settlement Agreement and include the following:
- Eliminate and prohibit any requirement by NAR, any Realtor® MLS, or Member Boards that listing brokers or sellers must make offers of compensation to buyer brokers or other buyer representatives and eliminate and prohibit any requirement that such offers, if made, must be blanket, unconditional, or unilateral;
- Prohibit Realtor® MLS participants, subscribers, other real estate brokers, other real estate agents, and their sellers from (a) making offers of compensation on the MLS to buyer brokers or other buyer representatives or disclosing on the MLS listing broker compensation or total broker compensation;
- Require each Realtor® MLS to eliminate all broker compensation fields on the MLS and prohibit the sharing of the offers of compensation to buyer brokers or other buyer representatives;
- Eliminate and prohibit any requirements conditioning participation or membership in a Realtor® MLS on offering or accepting offers of compensation to buyer brokers or other buyer representatives;
- Agree not to create, facilitate, or support any non-MLS mechanism for listing brokers or sellers to make offers of compensation to buyer brokers or other buyer representatives;
- Require that all Realtor® MLS participants working with a buyer enter into a written agreement (before the buyer tours any home) with the following provisions:
1. The agreement must specify and conspicuously disclose the amount or rate of compensation it will receive or how this amount will be determined;
2. The amount of compensation reflected must be objectively ascertainable and may not be open-ended; and
3. Such a Realtor® or participant may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.
- Prohibit Realtors® and Realtor® MLS participants from representing to a client or customer that their brokerage services are free or available at no cost to their clients, unless they will receive no financial compensation from any source for those services;
- Require Realtors® and Realtor® MLS participants acting for sellers to conspicuously disclose to sellers and obtain seller approval for any payment or offer of payment that the listing broker or seller will make to another broker, agent, or other representative acting for buyers (such disclosure must be in writing, provided in advance of any payment or agreement to pay to another broker acting for buyers and specify the amount or rate of any such payment);
- Require Realtors® and Realtor® MLS participants to disclose to prospective sellers and buyers in conspicuous language that broker commissions are not set by law and are fully negotiable;
- Require that Realtors® and Realtor® MLS participants and subscribers must not filter out or restrict MLS listings communicated to their customers or clients based on the existence or level of compensation offered to the buyer broker or other buyer representative assisting the buyer;
- Rescind or modify any existing rules that are inconsistent with the practice changes reflected in the Settlement Agreement; and
- Develop educational materials that reflect and are consistent with each provision in these practice changes and eliminate educational materials, if any, that are contrary to it.The Agreement also provides that the practice changes shall not prevent offers of compensation to buyer brokers or other buyer representatives off of the multiple listing service, nor will it prevent sellers from offering buyer concessions on a Realtor® MLS (e.g., buyer closing costs) so long as such concessions are not limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.
The Settlement Agreement further states that these practice changes will terminate 7 years after the class notice date.
The Settlement Agreement is still pending the federal court’s approval. We will continue to keep you updated as more information becomes available. If the Settlement Agreement is approved, the changes will go into effect within 60 days.
www.stewart.com
Nov 1, 2023 | Uncategorized
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Jul 27, 2023 | Uncategorized
In the complex world of real estate, one of the most debated topics is the necessity of property disclosure from sellers to prospective buyers. This debate becomes even more intriguing when we delve into the specifics of what is perceived as ‘material facts’—information that could potentially influence a buyer’s decision to purchase a property. These facts can range from structural issues, pest infestations, to a property’s less tangible history, such as deaths or crimes that occurred on the premises.
While property disclosure laws vary by state, we will focus on Massachusetts and the particularities of its legislation—specifically focusing on the disclosure of deaths (natural or otherwise) and crimes on the property.
Understanding Massachusetts Law Chapter 93, Section 114
According to Massachusetts law, particularly Chapter 93, Section 114, sellers are not legally obligated to inform potential buyers if the property in question is “psychologically impacted.” More explicitly, this means if a property was the site of a felony, suicide, or homicide, or that the real property has been the site of an alleged parapsychological or supernatural phenomenon, the seller is not required to disclose this information.
However, it’s essential to differentiate between ‘mandatory disclosure’ and ‘honesty in disclosure.’ While the law doesn’t require sellers to proactively reveal this information, they are obligated to provide truthful responses if buyers directly question them about the property’s history. Misleading a buyer or outright lying in response to direct inquiries can potentially lead to legal repercussions.
Understanding the Rationale and its Implications
The rationale behind this law is to protect sellers from the societal stigmas attached to properties where untoward incidents occurred. In many cultures and societies, properties with a history of death or crime are considered ‘stigmatized’ or ‘tainted,’ and this perception can significantly affect their market value.
However, this law also implies a greater responsibility on the buyers. Potential home buyers in Massachusetts should be aware of this law and take it upon themselves to ask detailed and comprehensive questions about the property’s history.
The Importance of Honesty in Real Estate Transactions
Despite the specifics of the law, the principle of honesty remains a fundamental cornerstone of any real estate transaction. While sellers are not legally bound to disclose certain information, maintaining transparency can foster trust and pave the way for smoother transactions.
Moreover, sellers should consider the ethical implications of withholding such information. While the law might not require them to disclose, the moral question of whether or not to share such details remains a personal decision.
Conclusion
Navigating the intricacies of property disclosure laws can be challenging, but understanding the local laws is crucial for both sellers and buyers. For sellers, it’s about striking a balance between their legal rights and ethical responsibilities. For buyers, it’s about asking the right questions and ensuring they are fully aware of what they are investing in. Regardless of the legal nuances, honesty and transparency should always be the guiding principles in real estate transactions.
Jul 12, 2023 | Uncategorized
When you’re grieving the loss of a loved one, the last thing you want to do is sort through the complex details of their assets – especially real property. But knowing more about what happens to real property after death can help avoid unwarranted surprises. There are many factors that play a role in how real property is transferred, like whether or not the deceased person had a will, or if the property is part of a trust or co-owned with others. In some instances, a probate proceeding may be required to ensure an orderly transfer of the decedent’s assets – including real property. Let’s explore when and how the title to real property is transferred during a probate proceeding.
What is probate?
Probate is the formal legal process of ensuring the validity of a person’s will, reviewing their assets and finalizing the executor of the estate, or the person responsible for distributing assets to beneficiaries and heirs as described in the will. Typically, this person is a close remaining relative. If the deceased individual (or decedent) did not have a will, the death is considered what is referred to as intestate. In this circumstance, the court uses state-specific probate and intestate succession laws to make fair and just determinations about the assets and assigns an administrator or personal representative to administer the estate.
How does probate work?
Although the probate process varies by state, there are some routine steps in every jurisdiction. Below is a simplified version of each:
1. File a petition. A petition for probate must be filed with the court in the jurisdiction where the decedent lived at the time of death by the individual who intends to act on behalf of the decedent. Once filed, the court will schedule a hearing to appoint the executor or name an administrator.
2. Give notice. Notice must be given to all parties who may hold an interest in the decedent’s estate, such as heirs and beneficiaries named in the will. The executor or administrator holds the responsibility of giving notice, which must be sent by mail or process service. Notice must also be provided to potential creditors. This is usually accomplished by publication in a newspaper with a wide circulation and must be published for several days or weeks, depending on state requirements.
3. Inventory and appraisal of all assets. Once the probate case has been opened, the next step is to determine the list of the decedent’s assets and respective value, then present them to the court. This is particularly important when it comes to real property, which will need to be appraised before it is put on the market, if a sale of the property is required.
4. Transfer remaining assets and close the estate. Once all claims, debts and expenses are paid; real property has been legally transferred to appropriate heirs or sold; and funds disbursed to beneficiaries, all records and receipts are submitted to the court with a petition to close probate. Once the court examines the records, and if there are no objections, then an order to close the estate will be filed by the court.
What happens when real property is sold through probate?
The executor or administrator of the estate is generally tasked with administering the sale of real property. The court controls the process of the sale, including how the property is marketed, which offer is accepted and negotiations that are made. There are some unique nuances to probate sales, which may include, but are not limited to, the following:
- Real property is often sold at a price relatively lower than average, with minimum overbid requirements in some states.
- The buyer may be asked to remit a deposit (10 percent of the sale price) when making an offer.
- Property is generally sold “as-is.”
- The closing process can take longer than a traditional sale.
Once the court approves the sale and a buyer has submitted an offer and deposit, the closing process can begin. In order to facilitate the closing, the Escrow Officer or Closing Agent may request copies of documents filed in probate court, which can include, but are not limited to: A Letter of Testamentary that confirms the individual has been granted authority to conduct matters on behalf of the estate; a certified copy of the death certificate recorded in the county where the decedent lived; and a copy of a filed disclaimer of interest from any beneficiary who rejects their rights to the property.
Is probate always required to transfer real property after death?
No, not all real property is subject to probate. There are certain circumstances where probate can be avoided when transferring real property after death, such as if title to the decedent’s real property was held in a trust; if it was jointly owned with a co-owner who had rights of survivorship; or if the property was shared with a spouse or domestic partner in a community property state, regardless if the spouse or domestic partner was on title.
How long does it take to transfer real property in probate?
A probate case should take less than a year but can extend to several years if there are unforeseen circumstances, such as a challenge to the validity of the will, a complicated list of assets, or an inability to locate beneficiaries. Also, when dealing with real property, title issues such as improper recordings after a divorce or an incorrect legal description in the court order can cause further delays.
Probate proceedings can be complex. Taking the time to discuss the process with an attorney and to understand the steps and court requirements can help provide insight and lessen overwhelming feelings about the process. At Old Republic Title, we’ll work with you to make sure your property rights are protected for years to come. For more helpful resources about title insurance and settlement services, contact an Old Republic Title representative today.
Copyright Old Title – Reprinted from https://www.oldrepublictitle.com/blog/probate-and-real-property-transfers/
This material is for educational purposes only and does not constitute legal advice. Old Republic Title strongly recommends that consumers obtain guidance and advice from qualified professionals, including attorneys specializing in real property law, probate law, or tax law to get more detailed and current information as to their particular situation.
Jul 12, 2023 | Uncategorized
The National Association of REALTORS® (NAR) recently released its latest report on Home Buyers and Sellers Generational Trends for 2023, reviewing market trends for 2022. Check out our summary of four major takeaways from this year’s report and what they mean for the real estate industry:
1. Baby Boomers overtook Millennials as the largest demographic of home buyers, making up 39 percent of the market in 2022, compared to 29 percent in 2021. They also remained the largest demographic of home sellers, jumping from 42 percent in 2021 to 52 percent in 2022.
One reason for this rise is, as NAR deputy chief economist Dr. Jessica Lautz explains, “Baby Boomers have the upper hand in the homebuying market. The majority of them are repeat buyers who have housing equity to propel them into their dream home…[and] they are living healthier and longer and making housing trades later in life.” Younger Boomers (ages 58-67 in 2022) may be seeking larger multigenerational homes or are choosing to move closer to family and friends, while Older Boomers (ages 68-76) may be seeking less property maintenance responsibility as they enter retirement.
2. First-time buyers made up only 26 percent of all home buyers, a sharp decrease from 34 percent last year, and the lowest number since NAR began tracking data in 2013. Seventy percent of Younger Millennials (ages 24-32) and 46 percent of Older Millennials (ages 33-42) were first-time home buyers. Behind these groups, 21 percent of Gen Xers (ages 43-57) were also first-time home buyers.
3. When relocating, all generations are moving farther distances, with Millennials typically moving the shortest distance of just 15 miles and Younger Boomers moving the furthest of 90 miles. The most common reason for such a move is to be closer to family and friends.
4. Gen Z (ages 18-23) now makes up 4 percent of buyers, an increase from 2 percent in 2021. Thirty percent of Gen Z buyers are moving directly from a family member’s home into their own first home and many are relying on family support systems to make the purchase. Gen Z also surprisingly expects to reside in their first home for 19 years, a much-longer stint than previous generations. As the most internet-savvy and climate-conscious generation, Gen Z buyers have likely done their research and are seeking a home that will sustain them for as long as possible. One thing is for sure: this generation is no longer “statistically irrelevant” and is gaining traction in the market.
Industry professionals can continue to cater to each generation by using data to create a good first impression, understanding and honoring customer preferences, and offering care and respect to the values and needs of each. For example, Baby Boomers will appreciate careful assistance with paperwork and inspections, touring areas that offer criteria that they value (e.g., affordability, lower tax rates, ample access to health care, moderate climates and low crime rates) and personalized touches, such as a hand-written thank-you note upon closing. For more ideas, check out our flyer on understanding generational trends.
There’s a reason countless Americans have relied on Old Republic Title for over a century. Through changing markets and generational trends, we continue to offer personalized service and a variety of title insurance resources designed to help our customers protect one of their biggest investments. Whenever you’re ready to buy or sell your home, Old Republic Title will be there to help.
Copyright ©2023 “Home Buyers and Sellers Generational Trends Report 2023.” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted without permission. July, 2023. https://cdn.nar.realtor//sites/default/files/documents/2023-home-buyers-and-sellers-generational-trends-report-03-28-2023.pdf
