Wait, What? Who?

An overview of seller transactions involving estates, trusts and power of attorney


 Cori Lamont  |    October 09, 2014
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Over the course of the last few years, the WRA legal staff has been confronted with a number of questions relating to transactions that involve sellers that are estates, held in trusts to include power of attorneys. The following are a few examples of the most frequently asked questions relating to each topic.

Signing of contracts/authority to sign

All required signatures are needed for all conveyances, including the offer ‚ÄĒ and any counter-offers or amendments thereto ‚ÄĒ and the deed per Wis. Stat. ¬ß 706.02.

Personal representative (estate)

A personal representative is someone who has received from probate court the authority and power to sell the property within an estate. It is imperative to make sure you are working with the correct person and not the heirs of the property. The personal representative will be appointed by the court. 

Trust

A trust is a written agreement that provides for an individual in the role of responsibility and a duty to manage the assets of the trust. This individual who acts on behalf of the trust is known as the trustee. 

If the home is in a trust, the trust documents designate the trustee(s) who are authorized to bind the trust to contracts and to engage in any real estate sales and purchases. There may be one trustee, or there may be two or more co-trustees. A real estate licensee is not responsible to determine and should not attempt to determine what kind of trust has been established ‚ÄĒ either revocable or irrevocable. However, the licensee is concerned as to whether the trustee has the authority to sell and the manner in which that person signs as a trustee.¬†

Often the trust will include a certificate of trust document that contains a signature page; this document confirms that the trust exists, and the signature page confirms that the appointed person has the appropriate authority to act on behalf of the trust. However, an attorney or a title company should review the trust instrument and applicable law to make sure that the trustees in a particular trust have the legal ability to contractually bind the trust.

Power of attorney 

A power of attorney (POA) is a written document executed by a principal who wants to give an authorized agent the authority to act on the principal’s behalf. 

A POA should be a written, preferably notarized document, with the fullest, most detailed instructions from the authorizing party. The person signing on behalf of another, referred to as the agent (historically known as ‚Äúattorney-in-fact‚ÄĚ), must be prepared to prove that he or she has the authority to sign if that authority is ever questioned, for instance, by a title company, a lawyer or another party to the transaction ‚ÄĒ that is best evidenced with a written document. The fact that a broker has a client relationship with a buyer or seller does not create the authority to sign on the behalf of the client.

Just remember when the person who had given the authority to another to act on their behalf passes away, then the POA ceases to exist as well. At that time, if the deceased had a will, then the property could now be held in the name of a trust or go into probate and a personal representative will be appointed. If the deceased was a party to a binding contract, the Entire Contract provision of the preprinted offer to purchase on lines 298-300 of the WB-11 Residential Offer to Purchase states that the contract binds the ‚ÄúParties to this Offer and their successors in interest.‚ÄĚ The transaction may stall for a bit until the proper authority is provided to act as the successor in interest, but the successor in interest is bound to the contract.

Real Estate Condition Report (RECR)

Generally any seller of one- to four-family residential properties and vacant land must complete a condition report. 

However, Wis. Stat. Chapter 709 does not apply to:

  • Personal representatives, trustees, conservators and other fiduciaries appointed by or subject to supervision by the court, but only if those persons have never occupied the property. This exception does not include powers of attorneys.
  • Real estate that has not been inhabited, such as new construction.¬†
  • Transfers exempt from the real estate transfer fee, such as between spouses, foreclosures or probate transfers. This exception does not include REO sales of foreclosed properties.

Personal representative (estate)

A personal representative who has never occupied the property is exempt from completing the RECR. 

Technically, there is no exemption from the Wis. Stat. § 709.01 requirement for a seller to complete a RECR if the personal representative occupied the property at any time in the personal representative’s life.

A seller in this position can either (a) complete the RECR to the best of his or her knowledge, (b) retain a professional to provide an inspection report to be used as the basis for completing the RECR, (c) refuse to complete the RECR and sell "as-is," risking buyer rescission, or (d) refuse to complete the RECR and sell "as-is," refusing to accept any offers from buyers who do not waive their § 709.02 right to receive the RECR and their §709.05 rescission rights. If the personal representative is not comfortable completing a condition report because he or she has no knowledge of the condition of the property, the representative may ask potential buyers to waive their right to a RECR.

Wis. Stat. ¬ß 709.08 allows a buyer to waive the right to receive a RECR and the right to rescind the offer based upon the content of the RECR. Buyers should be advised to confer with legal counsel before waiving any legal rights ‚ÄĒ REALTORS¬ģ cannot provide legal advice of this sort. In those circumstances, it is helpful if the MLS makes clear that the specific sale is an "as-is" sale, that the seller will not complete the RECR, and that the seller will condition acceptance of the offer upon buyer waived rescission rights so that the buyer may obtain the proper legal advice and draft the offer accordingly.

Trust

If the trustee never occupied the property, then the trustee is not obligated to complete a RECR. If the trustee occupied the property at some point, the trustee would be required to complete the RECR.
Please review the personal representative discussion on page 25 as to what the seller may want to do in this situation. 

Power of attorney

A person who is an authorized POA must complete the RECR if the property is a one- to four-family dwelling or vacant land. The exemption afforded a personal representative who has never occupied the property does not apply to the POA.
The court does not become involved in the appointment of a POA. When someone allows another to act as their POA, that authority is given privately by that individual usually with the help of their legal counsel and not through the court system. 

Deeds

The preprinted state-approved offer to purchase states that the seller will convey the property to the buyer by warranty deed at the closing. A warranty deed guarantees that the seller‚Äôs title is free and clear of all encumbrances except any of those specifically mentioned in the offer or the deed. As deeds go, a warranty is as ‚Äúgood as it gets.‚ÄĚ With any other type of deed, the seller is making a lesser guarantee to title; in that situation, the buyer should speak to an attorney.¬†

If listing a property that is owned by an estate or trust, a wise agent should ask for a copy of the deed to the property or the owner’s title policy, and have the title company run a search and hold to see how the property is held. 

When listing property through trustees, personal representatives or other persons who do not intend to provide a warranty deed, care should be taken to identify how property will be conveyed. The listing agent should advise cooperating agents if a warranty deed will not be given, and assure that any offer to purchase correctly identifies the intended type of conveyance before the offer is signed by the seller/client.

In addition, it would be prudent practice to ensure that the buyer understood that the seller was conveying the property by a personal representative’s deed or a trustee’s deed. Clarity is tremendously helpful to the parties in these situations so that the buyer and their attorney will not balk when they are informed that they are receiving a trustee’s deed or a personal representative’s deed. The seller may consider even including a clarification statement in the offer to avoid a confrontation about this issue in the future. 

Personal representative (estate)

A personal representative deed is used when a personal representative is settling a probate estate. Similar to a quitclaim deed, a personal representative deed does not guarantee ownership rights, but instead essentially just conveys whatever title and rights that he or she has, if any. 

Trust

A trustee‚Äôs deed is used when a trust is selling its interest in a property. A property held in trust is being sold by the trust, not the individual ‚Äúseller.‚ÄĚ Therefore it is the seller‚Äôs objective to transfer the property with a trustee‚Äôs deed.¬†

Power of attorney

A person who is a POA does not by default transfer title by a deed other than a warranty deed, but may choose to do so. The POA should consult with an attorney if they would like to explore an alternative deed to convey the property.
For a more in-depth discussion of estates, POAs and trusts, see the August 2014 Legal Update, ‚ÄúLimiting Listing Broker‚Äôs Liability‚ÄĚ at www.wra.org/LU1408.

Cori Lamont is Director of Corporate and Regulatory Affairs for the WRA.

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