John R. Robb MBA, NCARB

REALTOR© (281) 908 5012 JRobb@KW.com

Selling the Family Home: Letting Go of Everything but the Memories1

Among life's transitions, dealing with a family estate — and the sale of the family home — may be the most trying. Few transactions have the potential to be as emotionally charged. Yet those emotions can interfere with the many important decisions that family members must make together. "Even if you all agree that it's necessary to sell the house, you may disagree on a range of details, from which real estate agent to use to how long to wait before lowering the price if it doesn't sell quickly," says Michael Liersch, director of behavioral finance for Merrill Lynch.

Discord can create permanent rifts and may lead family members to neglect the home or rush it to market. It can also have serious financial consequences. Homes sold by estates tend to sell at a 3.6% discount to comparable homes on the general market, according to a 2012 study in the Journal of Real Estate Finance and Economics.

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While it can be difficult to deal with the sale of a family home, planning for how its proceeds might fit into your financial strategy can help you separate your emotions — and your memories of happy times spent there — from the practical decisions that need to be made. Here are eight strategies to help you, and your family, manage the process.

1) Establish a leader. Whether the executor is named in the will or chosen by heirs, he or she must be willing and prepared for a complex, time-consuming task, says Director National Personal Retirement Sales Executive, Amanda N. Ross. Whether you hire a professional executor or handle the duties yourself, one family member should take charge of conveying family decisions to the executor, real estate agent, contractors or other professionals, and — most important — of making sure all family members are informed of each development.

2) Build a professional team. The primary goal could be to maximize the profit on the home sale; for others it's to sell quickly, Liersch notes. "Your Financial Advisor can help the whole family think through that process and reach a common goal. In addition to your Advisor, your team should include legal help and a good real estate agent with experience in estate sales." Ross adds that because probate rules vary from town to town and court to court, "an experienced estate lawyer will guide you through the process and help you avoid delays and unnecessary costs."

3) Take an emotional roll call. "Have each family member write down what the house means to them, the good memories as well as any negative ones," Liersch suggests. Getting these feelings out in the open will help everyone understand where the emotions lie. Those emotions could affect such decisions as agreeing on a fair price.

4) Give everyone a voice. Set a clear process and ground rules for sharing opinions and reaching consensus. Depending on where people live, meetings could be face-to-face or via e-mail or Skype, but everyone should have equal access to information and the opportunity to be heard. "You're trading short-term conflicts for long-term benefits, both financial and emotional," Liersch says.

5) Set a time frame. Establish that there is a beginning, middle and end to the process. Set deadlines for each crucial phase. "Everyone needs to understand that there's a time to speak up and help develop the structure and game plan, and a time when it's too late," Liersch says.

6) Secure the home. Change the locks as soon as the house is vacant, since you don't know who might have obtained keys over the years. Make sure the home stays fully insured against theft and natural disasters. Thieves tend to gravitate to empty homes, so consider installing alarms or even alerting local police as to who is authorized to enter the house.

7) Continue maintenance. Maintenance lapses often lower the curb appeal and potential sales price. Clean out the refrigerator, turn off the water in winter so pipes don't burst, and make sure the lawn is kept up, Ross suggests. Keep the house current on taxes, utilities and any mortgage payment to avoid penalties.

8) Develop a strategy for the proceeds. After the house has been sold and all the creditors are paid, the executor may then distribute funds to heirs according to the terms of the will. Speak with a financial advisor or tax expert about the right strategy for distributing any proceeds remaining from the sale.

1 Merrill Lynch

https://olui2.fs.ml.com/SVE/CSE/Common/Pages/ArticleViewer.aspx?content_id=sellingthefamilyhome&NTR_RUN=RUN_ProductSolution_EstPlanning 2 Benefield, Justin, Rutherford, Ronald and Allen, Marcus T., "The Effects of Estate Sales of Residential Real Estate on Price and Marketing Time (2012)."

Journal of Real Estate Finance and Economics, Vol. 45, No. 4, 2012. Nov. 30, 2012. http://ssrn.com/abstract=2182121