How to sell property with clouded title (missing heirs)?

[guru10cea]

What is the name of your state (only U.S. law)? Property is in Houston Texas.

This is an awesome site!

My grandmother (Jane) died intestate. She owned 75% of her home and her sister (Maria) owned 25% of the home. Maria is also deceased.

Jane has 5 descendants who are now heirs (entitled to 75% of the property) and there are 6 descendants of Maria (who are also heirs, but entitled to 25% of the property).

Jane's heirs are all cooperative and looking to sell the property. Most of Maria's heirs cannot be found; one or two of Maria's heirs were found and are likely to cooperate with the sale of the house.

A very willing / able buyer for the house / property has been identified.

How can this property be sold to the willing / able buyer (assuming all efforts have been exhausted to find the missing heirs on Maria's side of the family and assuming that taking the matter through a Partition Suit would not be favorable)?

For example:

Can Jane's heirs sell it with some sort of non-traditional deed to the buyer? What type of Deed?
What is the risks that the buyer is taking if they did this? i.e., what is likely to happen if one of the six heirs--who are only entitiled to 25%--were to show up after the sale?
How does title insurance play into this scenario? Is title insurance a factor if the buyer is looking to buy the property outright (without a mortgage / lender).
What are the chances that we will be able to sell this property to the buyer?

Any help you could provide would be greatly appreciated.

Best regards,
G

 

[HomeGuru]

What is the name of your state (only U.S. law)? Property is in Houston Texas.

This is an awesome site!

My grandmother (Jane) died intestate. She owned 75% of her home and her sister (Maria) owned 25% of the home. Maria is also deceased.

Jane has 5 descendants who are now heirs (entitled to 75% of the property) and there are 6 descendants of Maria (who are also heirs, but entitled to 25% of the property).

Jane's heirs are all cooperative and looking to sell the property. Most of Maria's heirs cannot be found; one or two of Maria's heirs were found and are likely to cooperate with the sale of the house.

A very willing / able buyer for the house / property has been identified.

How can this property be sold to the willing / able buyer (assuming all efforts have been exhausted to find the missing heirs on Maria's side of the family and assuming that taking the matter through a Partition Suit would not be favorable)?

For example:

Can Jane's heirs sell it with some sort of non-traditional deed to the buyer? What type of Deed?
What is the risks that the buyer is taking if they did this? i.e., what is likely to happen if one of the six heirs--who are only entitiled to 25%--were to show up after the sale?
How does title insurance play into this scenario? Is title insurance a factor if the buyer is looking to buy the property outright (without a mortgage / lender).
What are the chances that we will be able to sell this property to the buyer?

Any help you could provide would be greatly appreciated.

Best regards,
G

**A: what is the status of probate for Jane's estate?

 

[guru10cea]

**A: what is the status of probate for Jane's estate?

My understanding is that everything is complete. It went through probate for the appointment of the administrator, dissemination of my grandmother's assets, etc. I beleive the property is outside of Probate matters and is more of a Real Estate matter (i.e., property where two separate groups of heirs have ownership). I think if we pursued a Partition Suit (which could lead to a court ordered sale of the house), we would go back to Probate court - but not sure. "Going throught the courts" seems to be a lengthy / expensive process. If we can sell it to this buyer directly, it would be better.

 

[nextwife]

Exactly WHO is NOW in title to the real estate, following the supposed completion of the referenced probates?

 

[guru10cea]

Please tell me you know how we can sell this property!

Exactly WHO is NOW in title to the real estate, following the supposed completion of the referenced probates?

Thank you for your response. The short answer is public records (title search) indicate that 11 people have a stake in the property (5 descendants from Jane's side and 6 descendants from Maria's side).

Let me provide some more clarification / additional history.

- My great grandfather (Bob) left 75% of the property to Jane (my grandmother) and 25% of the property to Maria (my grandmother's sister) via his WILL.

- Jane always lived in this house and thought she had full rights to it. It seems that Maria, and now her 6 descendants, were never aware that they had 25% ownership of this property. When Maria died (we believe WITHOUT A WILL) none of her descendants came looking to communicate or claim the 25% of my granmother's home.

- When Jane died (WITHOUT A WILL), her 5 descendants (including me) attempted to sell the property. We went to the probate court just to have them assign one of us as the administrator of Jane's estate (so that we were authorized to sell the property, disseminate the money in her accounts, etc.). This has been the only involvement of the probate court (i.e., the appointment of an administrator for Jane's estate).

- The court appointed one of us administrator, we found a willing / able buyer for the property, and as part of the selling process a Title Search was performed. The title then, and now, indicates 11 people have an interest in the property (the 5 descendants of Jane and the 6 descendants of Maria).

- The 5 descendants of Jane (who collectively have a 75% stake in the property) work very closely together and are motivated to wrap up this matter. Some of the 6 descendants of Maria (who collectively have a 25% stake in the property) are either a) not interested in being involved b) skeptical / unresponsive or c) missing. Out of the 6, one of them would be considered helpful, two have provided contact info., one has recently been unresponsive, and two are missing.

Please tell me you know how we can we sell this property to this buyer...

 

[nextwife]

So have the respective estates properly transferred the decedant's interests to the correct estate heirs or not?

If the probates were properly completed, there should NOT be any dead owners still in title.

 

[guru10cea]

If the probates were properly completed, there should NOT be any dead owners still in title.

All of the owners in title are believed to be alive. There is only one person, on Maria's side of the family, that is questionable. We are pretty sure he is alive though (but moves a lot and is hard to track)

So have the respective estates properly transferred the decedant's interests to the correct estate heirs or not?

For Jane's estate, definitely yes. For Maria's estate, I'm not sure. However, because the living descendants of Maria are listed in title, is this not an indication that it was transferred properly at some point? How could they show up in title with an improper transfer? Our lawyer doesn't seem to question the 75/25 split.... How we sell the property with that fact is where he seems to be focusing.

 

[nextwife]

All titled parties will need to sign any conveying deed, or multiple deeds can be prepared and each party deed's their respective interests on that deed. If the parties do not all agree to sell, a partition suit will need to be filed to force sale by the unwilling parties. The title company insuring the sale will research the title and can help determine what percentage of ownership each party acquired.

A quiet title action can be filed, if the party cannot be located, to deal with their interest. THis takes time and needs to be completed before attempting any sale.

 

[Texas Pooh]

If all the parties can not be located to sign the deed as suggested by nextwife, you'll have to bring a partition suit in County Court. The court will order the sale, and the proceeds for the hier who can not be found can be impleaded to the court registry (essentially, placed in a court trust). When/if the heir shows up, s/he claims it from the registry.

This allows the sale to go forward.


The entire process can be done pretty quickly.

 

[guru10cea]

All titled parties will need to sign any conveying deed, or multiple deeds can be prepared and each party deed's their respective interests on that deed. If the parties do not all agree to sell, a partition suit will need to be filed to force sale by the unwilling parties. The title company insuring the sale will research the title and can help determine what percentage of ownership each party acquired.

A quiet title action can be filed, if the party cannot be located, to deal with their interest. THis takes time and needs to be completed before attempting any sale.

Thank you. This is helpful info.

Since we feel it will be impossible to get all of them to convey their interest in the property to the buyer, and we feel the partition suit will be too lengthy / costly, what do you think would happen if we sold it with a non-traditional deed (e.g., A Deed without Warranty) or if many of us conveyed our individual interest (Deed with Warranty) - essentially closing the sale with a clouded title. In this case, the buyer may be taking on some risk. What risk is he really taking though? What would happen if we closed the deal and someone showed up years later?

For example: Let's say the property is worth $75K. Since Maria's heirs have a 25% share, and because there are 6 heirs, each heir on Maria's side would be entitled to $3,125 of the sale. Can we reason that, if we still made the sale, and if someone were to later show up, the worst probable case is the one heir would be entitled to $3,125 (maybe plus some interest)?

Reference info:
25% of $75K = $18,750
$18,750 divided by 6 = $3,125

 

[guru10cea]

The entire process can be done pretty quickly.

Texas Pooh,

Thanks so much for your response. How long do you think it could take? Also, how long do you think it should cost in legal fees?

If you don't mind, I'd like to hear your thoughts on my last comment to NextWife. Our perception has been that the partition suit could be cost / time prohibitive...

 

[nextwife]

Surely no lender will agree to finance a property in which there are unwilling owners who have not signed off their interests. Nor would any semi knowledgable buyer agree. Without a partition suite, all available sellers will need to join in on the conveyance in addition to having bthe court agree to hold out proceeds to un-findable parties.

 

[guru10cea]

Surely no lender will agree to finance a property in which there are unwilling owners who have not signed off their interests.

The buyer is very able (i.e., she will not need any financing / will pay in full).

Nor would any semi knowledgable buyer agree.

If the buyer really wants the property, and if the impact associated with the risk could be quantified as $3,125 per heir, isn't it possible the buyer wouldn't find this deal risky (from a mathematical / financial perspective)? Couldn't we provide the buyer even more incentive by, perhaps, deducting y x $3,125 from the selling price? (y representing the number of heirs we couldn't get to sign off their interest)

Without a partition suit, all available sellers will need to join in on the conveyance in addition to having the court agree to hold out proceeds to un-findable parties.

Wow... are you sure on this? If so, it seems we should definitely go the partition suit route... Are you saying that all proceeds would be held up even if Jane's heirs--the heirs that represent the 75% share of the property--are fully accounted for? I'm confused about the court comment... What court would get involved in a Real Estate transaction? Wouldn't it be a typical transaction where two lawyers get together and have a closing? I would think a court would only need to get involved if there was a dispute down the line... Is your comment specific to Texas?

Thanks again for all of your help!

 

[nextwife]

The buyer is very able (i.e., she will not need any financing / will pay in full).



If the buyer really wants the property, and if the impact associated with the risk could be quantified as $3,125 per heir, isn't it possible the buyer wouldn't find this deal risky (from a mathematical / finanical perspective)? Couldn't we provide the buyer even more incentive by, perhaps, deducting y x $3,125 from the selling price? (y representing the number of heirs we couldn't get to sign off their interest)



Wow... are you sure on this? If so, it seems we should definitely go the partition suit route... Are you saying that all proceeds would be held up even if Jane's heirs--the heirs that represent the 75% share of the property--are fully accounted for? I'm confused about the court comment... What court would get involved in a Real Estate transaction? Wouldn't it be a typical transaction where two lawyers get together and have a closing? I would think a court would only need to get involved if there was a dispute down the line... Is your comment specific to Texas?

Thanks again for all of your help!

The courts are brought in when legal action is needed to complete a transaction, or deal with disputes..

You cannot just co opt the rights of some of the owners to agree to the sale and the sales PRICE by leaving them out. Your legal exposure is well more than the percentage of proceeds each seller might be entitled to. They could challenge the entire conveyance if you simply sell and leave them out of the process. The transaction could be reversed.

IT is one thing for a the courts to agree you may still sell and hold out the share of a party who appears to have dropped off the face of the earth, it is entirely another matter to try to simply leave some parties out of the decision process. And in every case of missing parties with whom I've been involved, a quiet title action was ultimately necessary to proceed. Regardless, you can't just leave some sellers out of the sale process because it's easier for you. A partition suit may be necessary if you can't negotiate an agreement with the other sellers. You will need to track them down. You could start by getting a preliminary title report done, to set out the title insurer's requirements for a sale and who they determine to be in title, and to what extent.

 

[guru10cea]

They could challenge the entire conveyance if you simply sell and leave them out of the process. The transaction could be reversed.

Hmm... That doesn't sound good. Actually, I've been getting conflicting information on this. The realtor representing the buyer, and a contributer on another forum, seem to think the impact would not be that drastic. However, our lawyer did allude to this scenario also. Have you ever seen that happen?

PS - If you are interested in the thread on the other forum, here is a link. -->

PPS - Dee_Dub's idea (which sounded good, but it is highly unlikely to pan out) is to basically get someone on Maria's side to become an Administrator for her estate and then the two administrators (for each respective estate) could close the deal with the buyer. Texas Probate Court told me that they would not be able to / would be very difficult to appoint an heir on Maria's side to be the administrator if Maria has been deceased for more than 4 years (which it seems she has).

In every case of missing parties with whom I've been involved, a quiet title action was ultimately necessary to proceed.

The real estate agent representing the buyer did comment that they, at times, "can work around this"... I now suspect he is referring to the quiet title action. This is new information so I really appreciate it. I'm going to look into it more.

Given it seems our two options are either a) partition suit or b) quiet title action, what do you think is the better option (i.e., quicker, cheaper in legal fees, etc.)?

You could start by getting a preliminary title report done, to set out the title insurer's requirements for a sale and who they determine to be in title, and to what extent.

This sounds like a great idea. How much does it typically run to get a preliminary title report? I don't expect too many surprises in the report, but I'd like to get one (especially if it is not costly).