What is a Trust Sale?
A trust sale, also referred to as a trustee sale or an executor sale. Is a real estate transaction in which the proceeds of the sale of real property; are held by a trustee until the final beneficiaries of the trust have been determined. This allows for the properties to be sold at once; with no risk of any beneficiary receiving rights to their portion before another. Trust sales are usually initiated when there is a dispute among beneficiaries; and none of them can be trusted to sell their share at fair market value. The primary benefit of a trust sale is that it protects other assets from potential liability. From one beneficiary selling their share under unfair circumstances. The downside is that this process can take longer than an ordinary sale. Depending on how many beneficiaries there are and whether they all agree on terms of the sale.
How Does a Trust Sale Work?
A trustee will oversee the process of a trust sale by advertising the property for sale; conducting showings, and submitting offers. When the price is negotiated and the terms of the sale are agreed upon. The trustee will execute a sale agreement that names the beneficiaries; and the share each will receive. The property is then listed for sale with the proceeds being held in trust; until the final beneficiaries are determined. When all beneficiaries have signed off on the sale; the trust is dissolved and the proceeds are distributed accordingly. If there is any dispute or disagreement among beneficiaries. The sale can be terminated and the property; can then be listed as “for sale by owner” as if there were no trust in place.
Why Is There a Need for a Trust Sale?
Typically, a trust sale is initiated in cases where there are disputes among beneficiaries that could result in a failed sale. If a beneficiary was to attempt to sell their share of the property at an unfair price or to a disreputable buyer, they would put any other properties they hold as part of the trust at risk. A trust sale ensures that each beneficiary is held to the same standard; and no one can take advantage of the situation to take advantage of the situation.
How to Initiate a Trust Sale?
If a situation arises in which a trust sale is necessary, the executor of the trust will work with the beneficiaries to address their concerns. The executor will then advertise the property for sale and conduct showings, as if it were an ordinary sale. There will be a difference, however, in that the executor will also hold the proceeds in trust once the final beneficiaries are determined. If there is a dispute among beneficiaries, the sale can be terminated and the property can be listed as “for sale by owner” as if there were no trust in place. If there is agreement among all parties, the proceeds will be distributed accordingly and the trust will be dissolved.
The Process of a Trust Sale
Advertisement – When all beneficiaries have signed off on the sale; the trust is dissolved, the proceeds are distributed accordingly. If there is any dispute or disagreement among beneficiaries; the sale can be terminated and the property can then be listed as “for sale by owner” as if there were no trust in place. For example, suppose that a man named John leaves a trust with two beneficiaries: his sister Mary and his nephew Bob. Bob and Mary agree on the terms of the sale and submit an offer that is accepted. The trustee conducts a title search and finds that the property is encumbered by a $100,000 mortgage. The trustee advertises the property for sale, Mary and Bob each receive a portion of the proceeds from the sale of the property. Since the property is encumbered by the mortgage, Bob’s portion is directed toward the repayment of the mortgage balance.
Trust sales are when there are disputes among beneficiaries who cannot be trusted; to sell their share at fair market value. The benefit of this is that it protects other assets from potential liability. The downside is that this process can take longer than an ordinary sale; depending on how many beneficiaries there are and whether they all agree on terms of the sale. Although a trust sale may seem like a more tedious route to take when selling real estate; the benefits may outweigh the drawbacks in certain cases.