In This Chapter

Sometimes there are unusual circumstances surrounding the sale of a home. Two of them are relocating for a new job and selling the home of a recently deceased loved one. If you are relocating for professional reasons to another part of the country or the world, your new employer may be picking up the tab. That’s a good thing. However, as the saying goes, there is no such thing as a free lunch. If the company is paying, it may impose some limitations to how you market your home. These limitations are important, as they can affect how much money you will make on the sale.

If you are overseeing the sale of the home of a loved one who has recently passed away, this is also quite challenging, but in a different way. It’s an emotionally charged time to begin with. On top of that, you are being called upon to perform a business transaction while trying to manage your feelings of personal loss, and those of your family.

In this chapter, we analyze the challenges of both types of real estate sales. We discuss your options in a relocation sale and provide information and strategies for coping with an estate sale. If you adopt some good approaches to these scenarios, you will save money and time and limit the stress on your family.

Relocations for new jobs are big business. U.S. companies alone spend $32 billion annually on domestic corporate relocation, according to Worldwide ERC (www.erc.org), an association for employee-transfer professionals. This doesn’t even include international moves. When you relocate, most employers pay at least some of your expenses. And there are some companies that will pay all of them. But it is up to you to negotiate a deal, better known as a relocation package, with your employer.

On average, you will have only about 15 days to respond to a company’s offer to relocate you for a job, and 31 days to move to the new location, as estimated by Worldwide ERC. That doesn’t give you a whole lot of time to think about the opportunity itself, let alone to work out an acceptable agreement about how much of the relocation costs and logistics the corporation will help you with.

And the logistics may be grueling. You need to simultaneously sell the home in which you are currently living, while searching for a home to purchase in the new location. This will require trips to familiarize yourself (and your family) with the community and the housing inventory. You will need to research schools and enroll the children. There is time and expense associated with any relocation.

The good news is that you are lucky to have an employer to negotiate with. Many Americans don’t have a relocation company to lean on when they move to a new city for a job. You are already in a good position. You can make it even better by negotiating a strong package for yourself. You can do this by understanding the various services out there. After all, how would you know what to ask for if you don’t know that they exist?

Some companies manage employee relocations through their own human resources departments, while others outsource it by hiring a separate company that specializes in this area. Hiring an outside firm benefits the company because it allows it to focus on day-to-day business and not be distracted by running the side business of providing real estate services to its employees. They hire an outside firm because they’re better at it.

But another reason that impacts you is that your new employer doesn’t want to negotiate directly with you. They want to preserve the relationship. By outsourcing this business, the relocation firm becomes the “bad guy.” The outside firm adopts the responsibility of keeping costs down and controlling the process, so they have the ability to be a little tougher.

There are different types of relocation packages that are bundled as specific services. Each corporation bundles them together differently. Some have preset tiered packages based on job levels, whereas other companies have customized packages that address an employee’s individual needs.

Some of the most common expenses and services associated with relocation packages are moving expenses, finding a Realtor and real estate commissions, advice and assistance with financing on the new home, closing costs on both the sale and the purchase, inspection charges, etc. Some transferees get an allowance for miscellaneous expenses that come up over the course of the move.

Most companies offer to buy at least a portion of your home. This means that, no matter what you sell it for, they will make sure that you walk away with a certain minimum amount. This is called a partial buyout. Other companies might offer a full or guaranteed, or 100 percent buyout, or a price guarantee. This means that they will either commit to giving you a set price for your home, no matter what price it sells at, or they will actually buy the home from you directly and then sell it themselves. The company actually becomes the seller.

A guaranteed buyout is great for you because you get to take the equity out of the home no matter what happens. But it is a risk to your employer, because if your home ultimately sells for less than what they paid you, they will actually lose money. For example, if the relocation company buys your home for $600,000 and then it sells ultimately for $575,000, they will be out $25,000.

When you work with a relocation company to sell your home, it will be marketed with a relocation clause in effect. This means that when you list your home, a relocation clause was included in the listing agreement, and, when it sells, the clause will be included in that written contract. It is important for the Realtor who lists your home to disclose this to potential buyers before they make offers. This is because the buyer will be entering into a business transaction with a third party—the relocation company.

Additionally, the relocation company will require certain practices and impose specific rules that will affect just about everybody associated with the deal—the Realtors, the attorneys, the banks or lenders, the appraisers, the buyer, and you, the seller. Some of these practices may slow the deal down or affect its progress. You may feel somewhat frustrated by the constraints of the agreement. But your employer is assuming part or all of the risk in the sale of your home and has the right to manage the process as it sees fit and according to its own guidelines.

For example, if your company is giving you a guaranteed buyout, it will likely require three appraisals to establish a realistic value to the home. This step alone can take some time. There are also much more administrative requirements and paperwork than in a normal real estate transaction. Even the resolution of the inspection negotiations take longer because the company must have written estimates for and approve any and all repairs or credits.

Having your new employer involved in the sale of your home can be a financially rewarding, wonderful, and freeing experience, as long as you are completely aware of the negatives.

Estate sales have their own set of challenges. You may have lost a spouse and are the only person who has decision-making power over the estate of the deceased. Or you may have lost a parent and will be sharing the decision-making responsibility with several siblings. On the one hand, it can be a comfort to have others to lean on at this sensitive time. But it can be frustrating to have a committee of people to funnel every single decision through. When there is a group of relatives at the helm, as opposed to one individual, everything takes longer than it should and emotions can enter into the proceedings.

When you have lost a loved one, it’s hard enough to cope without having to worry about selling the home. If you can delay the sale without any penalties or loss of equity, we recommend that you do. Having more time to work through your grief without the added pressure of a business transaction is often a better strategy. Speak to an accountant familiar with the tax code and your financial situation first to see if you can delay it and for how long.

As with the sale of any residential real estate, if you want to get top dollar, all the approaches discussed in this book apply. Even though the owner has passed away and the home is full of his belongings, the home should still be cleaned and staged. The home should still be photographed. It should be exposed to the entire buyer pool and aggressively priced. Find a top Realtor to manage the whole process along with you and your family. In fact, the Realtor’s role will now be more important than ever.

Hopefully, the deceased had a will and established one person to oversee and manage what’s left of the estate. This person is the executor and has the power to make decisions on behalf of the estate, open and close bank accounts, write checks, and otherwise disperse money.

In a marriage, the surviving spouse is usually the executor. If there is no spouse but there are several surviving children, it can become more complicated. It is even possible to have more than one executor. Even so, when there are multiple surviving children who may all want to weigh in on their opinions, it can be quite challenging, especially at an emotionally sensitive time. On the flip side, it is very common for one sibling to feel that she is doing all the work, particularly if she lives locally and the others are farther away.

No matter what the situation in your family, there should be only one person communicating and interacting with the Realtor. Other nonlegal tasks can be divvied up amongst the siblings (unless the deceased wished otherwise), but legal duties and communicating with professionals like attorneys, Realtors, and accountants should be placed squarely on one person’s shoulders. Otherwise, communication would be a nightmare.

Proceeds (or money) from the sale of any real estate go to one place only, and that is to the person whose name is on the deed. If that person is deceased, then the check gets written out to the estate of the person’s name that is on the deed. It then falls to the executor to deposit it and distribute in any way that he sees fit, legally and in accordance with the will.

If there is a dispute that is intense enough to prevent the money from being forwarded after the sale, the money will be held in an escrow account until the dispute is settled.

Taxes paid on income from profits of the sale of a home owned by a deceased person are often referred to as an estate tax or even a death tax. They are paid out of the funds left in the estate itself. The amount of profit that can be taxed is calculated differently than profit on the sale of someone who is living. The profit on the sale of a living person’s home is based on what the owner bought it for and the expenses incurred throughout the ownership period. The profit on an estate sale is based instead on what is called the fair market value of the home on the date that the person died.

When one spouse dies, there is never an estate tax required to be paid by the one who is living. The deceased spouse may have left six homes and $100 million to the surviving spouse, and there will be no estate tax on it. When one spouse dies, the homeownership typically transfers directly to the surviving spouse. The good news is that when the living spouse goes to sell it one day, the way that the government calculates what is actually profit on the sale changes dramatically. The IRS no longer bases the profit on the appreciation from the year that it was first purchased. It now uses the day that the spouse died as the starting point, or basis, to determine how much the home has appreciated. If the couple lived in the home for 30 years, the appreciation (or what the taxes will be based on) will often be a fraction of what it was before the death, when both homeowners were still alive. When the surviving spouse finally sells the home as a single owner, the taxable profit will go way down.

While there may be an estate tax when a homeowner leaves the property to surviving children or beneficiaries, the estate tax will be paid by the estate itself before the proceeds are distributed to the children. Because the taxes are paid before the children collect, they are not required to pay income tax on the proceeds. Taxes cannot be paid twice.

Additionally, an estate tax is only paid (by the estate) if the estate in question has a total worth of more than a certain amount. As of January 1, 2009, that amount will be $3.5 million. This is a law that is somewhat controversial, but also interesting. When George W. Bush took office, he got legislation passed that set this amount. The amount changes from year to year. It began at only $675,000, then went to $1 million, then $1.5 million, then $2 million, and will change to $3.5 million in 2009. In 2010, it goes back down to zero and in 2011, back up to $675,000.

There are many people in Congress who are trying to change this law—and the amount—as they think it favors the rich. It has been introduced to the floor of Congress many times but has never gone to a vote. Be sure to check with an accountant or tax advisor to find out where the law stands when and if you are in a position to sell a home through the estate of a deceased person.

The following is an example of how to calculate the value of an estate.

Cash. Money is distributed in accordance with the will after the estate pays any taxes due.

Securities. The executor may decide to simply sell the securities (stocks, bonds, and so on) and divide up the income in accordance with the will. The estate pays taxes on it before it’s distributed. However, the heirs may decide not to sell but rather to hold on to the securities as a continued investment.

Life Insurance. By law, the proceeds must go directly to the named beneficiary in the policy; they do not go back into the estate of the deceased. The beneficiary does not pay taxes on the income; they are paid before the income is distributed.

Retirement Funds. These accounts usually, but not always, have named beneficiaries on them and income goes directly to them. The beneficiary does not pay taxes on the income. They are paid before the income is distributed.

Real Estate. Homes are often sold and the estate pays any taxes, commissions, fees, and so on. Any remaining proceeds are then distributed in accordance with the will or wishes of the deceased. Some heirs choose to keep the home and share in its use, particularly with vacation homes. A new deed must be drawn up in that case to show transfer of ownership to multiple parties.

You may be selling a home for a friend or family member who is alive but is somehow unable to execute the sale herself. The seller may be out of the country, or physically or mentally incapacitated. Power of attorney is a legal piece of paper that allows one person to make certain decisions, and to act on another person’s behalf. It must be stamped and notarized by a notary public. It is the notary public’s job to make sure that the person understands what he is signing. If there is any question (particularly in the case of a mentally incapacitated seller), the notary public should not sign it. Sometimes, it is necessary to go before a judge to get power of attorney.