Durable Power of Attorney – Sale of Parent’s Home

Question: My mother was recently diagnosed with Alzheimer’s Dementia and has moved out of her house and into mine. I have Power of Attorney from my Mother. What should I do with my mother’s house?

When we receive a question like this, the first thing we ask is whether Mother has retained her mental capacity. Once it is clear from conversations with medical professionals, the family and with Mother that she is unable to manage property or business affairs effectively by reason of mental illness/decline, we begin the discussion of what Daughter can do.

We find out what Daughter wants to do with the house and what Mother’s financial needs are. Often, we are told that selling Mother’s home is necessary because she no longer lives there and needs money to pay for her increased medical expenses such as 24 hour at-home care, adult day services programs, or assisted living care. The proceeds of any potential sale would go towards Mother’s continuing care and comfort.

We review the Durable Power of Attorney appointing Daughter Attorney-in-Fact to see the options regarding the home and other real estate. The Durable Power of Attorney is a very important document that if written and executed correctly, legally authorizes Mother, while mentally competent, to nominate Daughter to handle financial transactions in the event of her incapacity. In this case, we would look for a specifically delineated power allowing the Attorney-in-Fact to sell real estate.

Before Daughter is ready to place the house on the market and engage the services of a real estate listing broker, we would need to research the property. We would want to make sure the house is insured and identify any outstanding mortgages and liens, or unpaid property taxes or water/sewer charges. We would also research the deed and may even commission an independent appraisal to be done on the subject property.

When reviewing offers, Daughter, as a Fiduciary has a heightened obligation to her Mother. She must make sure that the Offer she accepts is for fair market value and not a “Sweet-Heart Deal” and that the transaction was at “Arm’s Length.” This is a fancy way of saying that Daughter must only accept the best deal—not the easiest or most “family friendly.”

Daughter, as a Fiduciary conducting a real estate transaction under a power of sale in a Durable Power of Attorney, should include additional language in the Offer and Purchase and Sale Agreement. These documents should state that even after the Offer is accepted or the Purchase and Sale Agreement signed, that if another buyer comes to the Seller with a higher offer, the Seller, as a Fiduciary, needs to entertain that higher offer as well as give the present Buyer a chance to increase his or her bid. The purpose of this clause is to ensure that Daughter can always obtain the highest value for the home. It also protects her against possible legal action brought buy potential heirs or other interested parties who think that the highest price was not obtained.

The Offer and Purchase and Sale Agreement should also include additional language stating that the sale is contingent on the Seller obtaining a License to Sell Real Estate from the Probate Court, should one be required. The reason for this is that sometimes the Buyer’s financer requires a License to Sell to make sure that clear title is obtained. This process can be time consuming because it requires court intervention and may prevent the closing from happening on the scheduled date. Without this language the Daughter would be contractually obligated to close on the property but unable to perform, and could be held in default of the Agreement.

As you can see, what seems to be a simple question “what should I do with my mother’s house” has many working parts and variables. If you find yourself in this situation, we recommend speaking with an experienced attorney to help guide you through this process. Many law firms, including the Law Office of Frank V. Grimaldi, can handle the matter in its entirety or in a tailor-made supervisory/consulting capacity.