Selling Property During Probate in New Mexico

Quick Summary: Selling Property During Probate in New Mexico

• Only a personal representative (PR) has the legal authority to sell estate property during New Mexico probate.
• Barring any specific will instructions, the PR has discretion to sell property when they believe it is prudent for settling the estate.
• Interested parties may object to a sale if they feel it isn’t in the best interests of the estate.
• Creditors may have a claim against any sale’s proceeds if the estate can’t otherwise pay its debts.

Need immediate help? Contact New Mexico Financial & Estate Planning Attorneys.

During probate, the personal representative (PR) of an estate sometimes finds it necessary, or at least advisable to sell a piece of property. This situation is most common when the estate doesn’t have enough cash to fully cover its bills or when dividing the estate is difficult (or impossible) without liquidating some of its assets, first. A will may also direct the PR to make a sale. 

The probate code gives the personal representative the power to act in the best interests of the estate, without needing a court order to do so. If the PR determines that a property sale is prudent for whatever reason, and the decedent’s ownership interest isn’t in question, then they can sell a property as a routine part of estate administration. 

New Mexico Financial & Estate Planning Attorneys, including Senior Attorney Don Harris, can assist you with understanding your legal duties and options if you are a personal representative facing a possible property sale during probate. We can also assist if you are an heir, creditor, or other claimant with an interest in the property of an estate.

Schedule a confidential appointment and speak to an experienced estate lawyer with no obligation when you call (505) 503-1637 or contact us online.

When Can a Personal Representative Sell Real Estate During Probate?

During probate, an estate’s personal representative (sometimes called the executor outside of probate) is appointed by a court. This appointment gives the personal representative the authority to dispose of estate property, including through a sale during probate. The PR can also proceed with actions they deem prudent without needing a court order or court approval (NM Stat § 45-3-704). 

The personal representative duties in New Mexico are controlled by the state’s version of the Uniform Probate Code. Their actions may also be directed by a will, if one is available.

As part of their powers and duties, the PR has permission to sell estate property just as if they were the original owner of the property (NM Stat § 45-3-711). However, the PR also acts as a fiduciary on behalf of the estate, its creditors, its beneficiaries, and other parties with an interest in its competent administration. Accordingly, the PR must exercise sound judgment and be diligent about any actions they take, including when and how they decide to sell of property. 

Someone with an interest in the estate could always object to the sale and call the PR’s judgment into question if the sale represented self-dealing, a conflict of interest, or an act of bad faith that actively harmed the estate or its beneficiaries. They could, accordingly, petition the court to have the sale voided (NM Stat § 45-3-713).

Based on these permissions and limitations, a PR can be considered free to sell estate property when:

• The will does not forbid the property’s sale
• They are not under a court order or a form of binding, legal agreement not to sell the property
• The PR deems that the sale is prudent for the efficient and prudent administration of the estate
• The PR has been cautious to ensure that the title is not encumbered and that they aren’t violating another party’s ownership interest in the course of the sale
• The PR has conducted reasonable due diligence, such as by researching an appropriate price for the sale and determining that the buyer is capable of full payment
• The sale is unlikely to be seen as self-dealing, a conflict of interest, or an act of bad faith

If a PR is concerned that any of the above parameters have not been met, they can always have a proposed sale reviewed by an attorney prior to listing or closing.

Can Real Estate Be Sold Before Probate Begins?

Only a PR has the authority to manage, transfer, or sell estate property. Accordingly, the New Mexico estate property transfer process cannot legally begin until the PR has received their letters testamentary (or letters of administration). Selling estate property in New Mexico before probate is a violation of the law.

Can Non-Probate Property Be Sold Before Probate Begins or Ends?

Non-probate property transfers occur outside the jurisdiction of the probate process. Once the recipient of the property has it legally in their possession, they have discretion to make a sale.

Types of non-probate transfers include:

• Property titled with a transfer-on-death deed (TODD) or a joint tenancy with rights of survivorship deed (JTWROS).
• A primary residence transferred using an affidavit of surviving spouse (NM Stat § 45-3-1205).
• Property placed in a living trust.

For property placed in a trust, the trustee should refer to the guiding terms of the trust before selling it. They may also need the consent of one or more beneficiaries if those beneficiaries hold a present or future interest in the property.

In any case, the proceeds from the sale of any property formerly owned by the decedent may be considered available for the repayment of debts until the window for all estate creditor claims during New Mexico probate has passed. This window lasts two to four months from the date creditors receive notice (NM Stat § 45-3-801) and up to a year after the decedent’s death if notice was not given (NM Stat § 45-3-1006).

A sale can technically be arranged before this point, but both the buyer and seller should perform ample due diligence to avoid a possible reversal or an unexpected claim on the sale proceeds.

How to Sell Property During New Mexico Probate

When a sale has been arranged, the PR can transfer the property to its new owner using a personal representative’s deed. This deed must be recorded in the office of the county clerk where the property is physically located.

When Is Court Approval Required for Probate Property Sales in New Mexico?

A PR has the authority to sell estate property without court approval. Obtaining court approval may be advised when there are questions or issues regarding the title or the decedent’s free and clear ownership interest. A court may also weigh the appropriateness of a sale when a party objects to it on the grounds that it represented a breach in the PR’s fiduciary duty.

Since no one has a present ownership interest in the property until probate closes, grounds for objecting to a sale are otherwise limited to situations where the complaining party can demonstrate that the sale is negligent, self-dealing, in contradiction to a contractual transfer (e.g., a transfer-on-death deed), or conducted in bad faith.

If a PR is concerned about selling property, they can consult with a New Mexico probate attorney for guidance and assistance with performing the expected level of due diligence.

Is It Possible to Sell Inherited Property During New Mexico Probate?

Heirs who are not the estate’s personal representative are barred from selling inherited property during probate in New Mexico. They only gain the right to sell the property at the end of probate, once the property is fully transferred to them by the PR.

It is possible to arrange for sale in advance, but the parties involved have to give full disclosure, and they should perform ample due diligence. They should also be prepared for the sale to be delayed or canceled for any number of reasons. The property may be encumbered by a lien, creditor claim, or contesting heir claim, in some circumstances.

Refer to an estate law attorney in New Mexico for guidance on selling inherited property while following state law requirements and the recommended due diligence procedures.

Selling Property During New Mexico Probate FAQ

How long does it typically take to sell property during probate in New Mexico?

The sale of estate property during probate can introduce significant procedural delays compared to a typical real estate transaction. Factors to consider include:

• The expectation to be prudent and act in the best interests of an estate (and, by extension, its beneficiaries) when arranging a sale of estate property
• Extended due diligence by both parties, including the need to avoid possible creditor claims or property ownership disputes
• The window for creditor and claimant rights, which could lead to a reversal of a transaction, in extreme cases
• Possible probate contests and property disputes, which could result in delays or an order to halt any pending sales

Because of all of these factors, one can expect the sale of estate property to take several months to a year or longer.

Can creditors make claims against property sale proceeds during New Mexico probate?

Yes. Creditors’ claim to estate property holds a higher priority than heirs’. In fact, the need to free up funds to repay debts is one of the most common reasons that property is sold during probate.

Personal representatives should carefully consider their obligations to repay an estate’s debts as part of their overall responsibilities for estate administration. Before entering a sale, they can review their situation with the experienced team at New Mexico Financial & Estate Planning Attorneys.

Senior Attorney Don Harris is certified in creditors’ rights by the American Board of Certification. This experience, along with our history of handling a wide range of cases involving New Mexico probate law, can help you understand your options while building a strategy to protect yourself and the estate you represent.

What happens if multiple heirs disagree about selling probate property in New Mexico?

Heirs have no legitimate claim to property until it has been transferred to them at the conclusion of probate. Until that time, they can only object to a sale when they can prove that it contradicts the will or represents a breach in the PR’s fiduciary duties.

If an heir or someone else wishes to obtain the property, rather than have it sold, one of the most common solutions is for them to buy it outright from the PR.

Get Help From Experienced New Mexico Probate Attorneys

Senior Attorney Don Harris and the rest of the New Mexico Financial & Estate Planning Attorneys team want to assist you in any way we can. Reach out to us to discuss your options and form a game plan to handle estate property by calling (505) 503-1637 or contacting us online.