Detailed Answer — what you need to know under Montana law

This section explains how a sale of real estate works when the decedent’s house is still encumbered by a mortgage in Montana. It assumes there is an open probate or that probate will be filed. This is a general overview — specific facts can change the result.

Who controls the house during probate?

After someone dies, legal title to their property generally moves into the probate estate until the estate is administered and assets are distributed. Only the personal representative appointed by the probate court has the legal authority to sell estate property unless the decedent used a non-probate transfer mechanism (for example, joint tenancy, a beneficiary deed, or a transfer-on-death registration).

Does the mortgage have to be paid before a sale?

No — the mortgage remains a lien that travels with the property. In practice, a buyer and the title company will want the mortgage paid off or otherwise cleared at closing so they can provide clear title. Options include:

• Paying the outstanding mortgage from the estate sale proceeds at closing.
• Obtaining the lender’s agreement to a payoff or to a short sale (if the sale price is less than the mortgage balance).
• Allowing the buyer to take the property subject to the mortgage (less common; many buyers and lenders avoid this).
• Getting a court order approving a sale free and clear of liens with arrangements to pay creditors from sale proceeds (used in certain circumstances where liens or priorities must be resolved).

Does the personal representative need court approval to sell?

Often a personal representative has statutory powers to manage and sell estate assets, but Montana law and local practice commonly require either notice to creditors and heirs or express court approval for sales of real property. Whether court approval is required depends on how the estate administration is structured and what powers the will or the court order grants the personal representative. When required, the court issues an order authorizing the sale and directing how liens are handled.

What happens if the mortgage lender objects or the loan is in default?

If the loan is in default, the lender still has the right to protect its security interest, including pursuing foreclosure according to Montana law. The personal representative should contact the lender early to obtain a payoff statement and learn whether the lender will accept a short sale, allow a deed-in-lieu of foreclosure, or require full payment. If foreclosure is imminent, a quick court-supervised sale or other arrangement may be necessary to preserve value for the estate.

Special situations to watch for

• If the house was owned jointly with rights of survivorship or held in a transfer-on-death/beneficiary deed, it may pass outside probate and the surviving co-owner or beneficiary will control it.
• If heirs agree to buy the house from the estate, the sale still typically must be handled through the personal representative and may need court approval to ensure the estate gets fair market value.
• Small-estate procedures or transfer affidavits may allow transfers without full probate in limited circumstances — check Montana’s rules for simplified transfer if the estate qualifies.

How the sale proceeds are used

Proceeds from a sale of estate property are used to pay: (1) funeral and administrative expenses, (2) taxes and debts (including the mortgage), and (3) remaining assets are distributed to heirs or beneficiaries under the will or Montana intestacy rules. If sale proceeds are insufficient to pay secured debt, the mortgage holder may pursue its remedies against the property.

Where to read the law and find forms

Montana’s probate statutes and procedural information are available from the Montana Legislature and the Montana Judicial Branch. For a general overview of probate processes and requirements, see the Montana Courts self-help probate pages: https://courts.mt.gov/selfhelp/probate. For statutory text and specific provisions, consult the Montana Code Annotated site: https://leg.mt.gov/bills/mca/ (search the probate-related chapters and sections for personal representative powers and estate administration).

Reminder: This article explains common Montana probate principles but does not replace advice tailored to your facts. Always confirm statutory citations and local court practice with an attorney or the probate court clerk.

Helpful Hints — practical steps when a deceased parent’s house has a mortgage

1. Don’t sell anything before a personal representative is appointed (unless a valid non-probate transfer applies). Unauthorized transfers can be reversed.
2. Locate the mortgage loan documents and contact the lender immediately to get a current payoff statement and learn the lender’s requirements.
3. Determine whether the property passed outside probate (joint tenancy, beneficiary deed, or trust). If so, probate may not be necessary for the transfer.
4. Talk to a probate attorney early — selling real estate in probate routinely involves deadlines, notice requirements, and court filings.
5. Obtain a local appraisal or market analysis to document fair market value if the sale will need court approval.
6. If the mortgage balance exceeds value, discuss short sale or deed-in-lieu options with the lender and counsel; these require lender cooperation.
7. Work with a title company experienced in probate closings to ensure liens are handled correctly at closing.
8. Keep heirs and interested parties informed and document all communications and offers to avoid disputes that can delay sale or require court hearings.

Where to get more help: Contact the probate clerk at the county courthouse where the decedent lived for local filing rules and deadlines, and consult a Montana probate attorney to protect estate interests and comply with court requirements.

Disclaimer: This information is educational only and not legal advice. It does not create an attorney-client relationship. For advice about your specific situation, please consult a licensed Montana attorney.