[WSBAPT] Short-sale of real estate in probate

[Jon Fritzler]

Listmates,

I represent a PR who does not have nonintervention powers in an estate that was originally thought to be solvent but turns out to be insolvent.  The main asset is the decedent's house. As is required when a PR without nonintervention powers is selling real estate, the estate had the house appraised before listing it.  It was listed for quite some time before the estate finally got an offer for 90% of the appraised value, the minimum price that the PR could accept per RCW 11.56.090.  (The decedent used a wheelchair and some modifications had been made to the house. It is also in need of some improvements.  Together, these factors reduce its marketability.)  The PR accepted the offer - contingent on court approval.

However, there is a mortgage on the property and after deducting the realtor's commission and the costs of administering the estate, the net proceeds from the sale will not be sufficient to completely satisfy the mortgage on the property.  Because of this, the realtor said that the mortgage lender would need to approve the sale and asked them to do so.  The lender then obtained its own appraisal, which came back higher than the estate's appraisal.  Based on its appraisal and its own requirement that the net proceeds be at least 88% of its appraisal, the lender has refused to approve the sale.

About the same time that the PR accepted the offer, the lender referred the property to foreclosure.  There is caselaw holding that if the property is foreclosed on the expenses of administering the estate will not have priority over the mortgage. In re Estate of Patton, 405 P.3d 205 (Wash. App. 2017).  This, of course, is the opposite of what would happen if the property is sold by the PR.

My question is this:  In the context of a probate, is the realtor correct that the lender must approve the sale?  In other words, if the estate moves ahead with asking the court to approve the sale of the property and the court approves it, does the lender's refusal to approve the sale matter?  I am considering filing a motion to approve the sale, setting it for hearing, and giving the lender notice.


Sincerely,
Jon M. Fritzler
Attorney at Law
717 E. 22nd St.
Vancouver, WA 98663
Tel. 360.818.4431
Eml fritzlerlaw at outlook.com<mailto:fritzlerlaw at outlook.com>
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