[WSBAPT] Estate Funds to "Improve" Real Property

[Eric Nelsen]

I agree with Marvin that if possible, it’s good to have a few thousand dollars to do some minor repairs, touch-up paint, cleaning, staging, etc., to get property for sale. But in general I advise my clients strongly against doing anything to “improve” the property in an effort to get a better price, for several reasons.

First, the PR’s duty is to settle the estate as quickly as possible and sell as-is “without sacrifice” per RCW 11.48.010; clearly the “without sacrifice” standard means only to get it sold for its as-is value, and there is no duty to make investment or speculative efforts to increase the value of the estate. So, it’s arguably a breach of fiduciary duty to use estate cash to improve estate real property in hopes that the real property can be sold for a higher price that covers the expenditure of the cash. If the gamble goes wrong, the liability falls on the PR.

Second, Murphy’s law makes it a bad idea. My rule of thumb with contractors is to take their estimate of time and cost and double them both. A 3-week kitchen remodel for $30,000 will take 6 weeks and cost $60,000. It’s not a matter of dishonesty so much as optimism and salesmanship by the contractor, combined with the unknown issues that arise midstream and complicate almost any remodel.

On a couple occasions, I have reluctantly agreed to have the PR conduct improvements on real estate, after all the heirs gave the estate written agreements stating that they understood it was a speculative effort that they were all agreeing on, there was no guarantee the price would increase, etc., etc. In both instances, the project took at least twice as long and took at least twice as much as the contractor estimated, and the only thing that bailed out the estates was the insanely inflated real estate market in Seattle. Effectively, the project took so long that the general real estate market rose enough to squeak out something better than break-even. My plan going forward if I encounter this again, is to tell the PR not to do it, and if the heirs are insistent, to distribute the real estate in kind to the heirs and let them take on the job.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Brent Williams-Ruth
Sent: Tuesday, March 9, 2021 4:26 PM
To: WSBA Probate & Trust Listserv <WSBAPT at lists.wsbarppt.com>
Subject: [WSBAPT] Estate Funds to "Improve" Real Property

Greetings List -

I was approached today by a company that would like me to keep them in mind for when I have Estates with real property that could benefit from spending estate funds to improve the real property so that it will be able to fetch more on the open market.

I have not yet had this issue cross my desk. Fortunately, each piece of real property that I have had has either gone to a surviving spouse or needed something simple like - cut back the hedges and shrubs that have been ignored for the past five years.

I am intrigued, but I also have reservations and am curious as to what collectives thoughts on that.

Thank you!
Brent



Brent Williams-Ruth (preferred pronoun: he/him)
Attorney-At-Law

Law Offices of Brent Williams-Ruth, a division of BWR Consulting, PLLC

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