Short Answer

Yes — you can often sell a decedent’s house during probate in South Dakota even if a mortgage remains on the property, but only if the person in charge of the estate (the personal representative or administrator) has legal authority to sell and the sale handles the mortgage lien. The mortgage does not automatically block sale, but it does affect how proceeds are distributed and whether the buyer or the estate must satisfy the loan at closing.

Who can sell the house?

During probate, the person with authority is the personal representative (executor named in a will or an administrator appointed by the court if there is no will). That person must act with the powers granted by the will or by South Dakota probate law. If the personal representative has statutory authority or specific authority in the will, they can sell estate real property. If authority is unclear or contested, the personal representative may need court approval before selling.

For more on the South Dakota probate code (Uniform Probate Code provisions adopted in SD), see the South Dakota Codified Laws, Title 29A: SDCL Title 29A (Probate).

How does an existing mortgage affect a sale?

Key points to understand:

• A mortgage is a lien on the property. A buyer or the estate cannot avoid that lien unless the loan is paid off or the lender agrees to release it.
• Common outcomes at closing are: the estate uses sale proceeds to pay off the mortgage; the buyer pays off the mortgage as part of the purchase; or the buyer takes the property subject to the mortgage (rare in residential sales and often requires lender approval).
• If sale proceeds are insufficient to pay the mortgage and other creditors, the estate may be insolvent. In that case, creditors (including the mortgagee) get priority under probate law and the court may direct sale net proceeds to creditors first.
• The lender can foreclose if mortgage payments aren’t maintained. That can complicate or cut short a probate sale, so contact the lender early.

When is court approval required?

Court approval is often required if the will does not give express authority to sell, if beneficiaries object, or if the sale is outside the personal representative’s ordinary powers. Even if the personal representative has statutory powers, the representative may choose to get the court’s confirmation for a sale “free and clear” of certain claims to protect buyers and clear title for closing. If there is dispute among heirs, a court-ordered sale is the safest route.

Practical step-by-step checklist to sell during probate

1. Confirm who is authorized: Obtain the letters testamentary or letters of administration from the probate court confirming the personal representative’s authority.
2. Locate mortgage and lien information: Get a copy of the deed and mortgage from the county register of deeds and contact the mortgage lender for a payoff demand.
3. Determine estate solvency: Identify estate assets and creditor claims. If assets will cover debts, the sale process is straightforward. If not, expect creditor-priority rules to apply.
4. Decide whether court confirmation is needed: If the will or state law gives clear power to sell and beneficiaries agree, you may be able to sell without a court hearing. If unclear or contested, petition the probate court to approve the sale.
5. Market and accept an offer: Disclose the mortgage and whether the sale will pay the loan off at closing or be subject to lender approval.
6. Coordinate closing and payoff: The title company or closing attorney will request a payoff statement from the lender, handle payoff from sale proceeds, and ensure the mortgage lien is released or satisfied at closing.
7. Distribute remaining proceeds under probate rules: After paying secured and priority creditors, distribute funds to beneficiaries per the will or South Dakota intestacy laws.

What if the sale proceeds don’t cover the mortgage?

If the estate is insolvent (debts, including the mortgage, exceed the estate’s assets), the mortgage lender has a secured creditor claim. The lender can pursue foreclosure unless the estate has other funds to pay the loan. The personal representative must follow statutory priority rules for paying creditors. If necessary, the personal representative should consult the probate court and creditors to determine the best course (possible short sale, negotiating with the lender, or allowing foreclosure).

What buyers should know

• Buyers should obtain title insurance and a full payoff demand before closing to confirm the seller (estate) can deliver clear title.
• Many lenders will not approve assumption of a mortgage; buyers usually expect the mortgage to be paid off at closing and a new loan obtained.
• If the personal representative is selling under court order, buyers often request a copy of that order to protect their purchase.

Timeline and common delays

Probate sales can take longer than ordinary sales because of the need for probate authority, creditor notice periods, and potential court hearings. Plan for extra time for documentation, court scheduling, and lender payoff processing.

Where South Dakota law is relevant

South Dakota’s probate laws (Title 29A) govern the powers of personal representatives, priorities of creditors, and procedures to confirm or approve estate sales. For reference to the statutory topic, see SDCL Title 29A (Probate): https://sdlegislature.gov/Statutes/Codified_Laws/DisplayTitle.aspx?title=29A.

For practical probate forms and local procedures, the South Dakota Unified Judicial System site can help with court contact and forms: https://ujs.sd.gov/.

Helpful Hints

• Get formal authority: Obtain letters testamentary or letters of administration before listing the property.
• Contact the lender early: Ask for a payoff demand and discuss options (payoff at closing, short sale, or other arrangements).
• Talk to the county recorder: Confirm recorded liens and any other encumbrances before marketing the property.
• Consider a court-confirmed sale: If beneficiaries disagree or title concerns exist, a court-confirmed sale protects the personal representative and the buyer.
• Budget for delays and costs: Probate, title clearance, and payoff processing take time and can reduce net proceeds (administration costs, attorney fees, taxes, closing costs).
• Keep detailed records: Track communications with the lender, the sale process, and disbursements to show the court and beneficiaries you acted prudently.
• Consult a probate attorney: If the estate is insolvent, creditors are contesting, or you need court approval, get legal advice to avoid personal liability as the personal representative.