Disclaimer: This is general information, not legal advice. For advice tailored to your situation, consult a licensed Indiana probate attorney.
Detailed Answer
Short answer: Yes — a house with a mortgage can often be sold while the estate is going through probate in Indiana, but the process requires attention to who has legal authority, what the mortgage lender requires, and whether the probate court must approve the sale.
Who can sell the house during probate?
The person who may sell estate property is the personal representative (called an executor if named in the will, or an administrator if appointed by the court). The personal representative has a fiduciary duty to preserve estate assets and follow the will and probate rules. If no personal representative has been appointed, you cannot generally sell the property on behalf of the estate.
Where the personal representative’s authority comes from
Indiana’s probate code gives the personal representative the power to manage estate property and, where necessary, seek court approval to sell real estate. See the Indiana probate statutes (Title 29) for the statutory framework: Indiana Probate Code (Title 29).
How the mortgage affects the sale
- Mortgage is a lien on the property. A sale does not automatically remove the lender’s lien. The mortgage must be paid off at closing or otherwise handled (for example, a buyer may assume the loan or obtain new financing that pays the mortgage).
- The lender may have the right to accelerate the loan (require full payoff) when the borrower dies, depending on the mortgage terms. Contact the lender early to learn its requirements.
- If the estate lacks cash to pay the mortgage, the personal representative can sell the property and use proceeds to pay the lender, closing costs, taxes, and probate costs in the order permitted by law.
Do you need court approval to sell?
Often the personal representative can sell estate property without a separate court order if the will or statute gives clear authority. However, if authority is unclear, heirs object, or the sale is not clearly in the estate’s best interest, the personal representative should ask the probate court to authorize the sale and set sale terms. A court-confirmed sale can protect the personal representative against later claims by heirs or creditors.
Common sale options
- Traditional sale at closing: Buyer obtains financing or pays cash; mortgage is paid off from sale proceeds at closing and lender releases lien.
- Assumption or subject-to sale: Buyer assumes the mortgage or takes the property subject to the mortgage. Lender approval is usually required; otherwise the loan may be called due.
- Short sale: If the mortgage balance exceeds expected sale proceeds, the lender may agree to accept less than full payoff. Lenders will evaluate and must approve a short sale.
- Sale under court order: If heirs object or the case is complex, the personal representative can seek court permission (confirmation). A court sale typically requires notice to interested persons and may include confirmation hearing rules in the probate code.
Practical steps to follow
- Confirm who is the personal representative and that letters testamentary/administration are issued by the probate court.
- Contact the mortgage lender to get a payoff statement and learn whether the loan accelerates on death or requires consent for assumption.
- Obtain a current title report to identify liens and other encumbrances.
- Estimate estate cash: determine whether estate funds exist to maintain the property and pay mortgage and taxes while the sale proceeds.
- If necessary, file a petition with the probate court to authorize sale and request court guidance on sale procedure and confirmation.
- Work with a realtor and a closing/title company experienced in probate sales to prepare the listing, disclosures, and closing documents.
Hypothetical example
Suppose a personal representative is appointed and the decedent’s home has a $150,000 mortgage. The house can be listed and sold for $200,000. At closing the title company will use sale proceeds to pay off the $150,000 mortgage, pay closing costs and probate costs, and distribute the remainder to heirs per the will or Indiana’s intestacy rules.
When court involvement is more likely
Seek court approval if heirs disagree about selling, if the sale involves unusual terms (e.g., sale to a family member), if the estate lacks funds to manage the mortgage while waiting for a sale, or if the personal representative’s authority is in question. Court-approved sales reduce post-closing litigation risk.
Where to read the statutes and get forms
Review Indiana’s probate statutes for authority and procedure: Indiana Code Title 29 (Probate). For practical probate process information, visit the Indiana Courts probate pages: Indiana Courts – Probate.
Helpful Hints
- Get appointed as the personal representative before attempting a sale. The court issues documents (letters) that prove your authority.
- Talk to the mortgage lender early. Ask for a payoff statement and whether the loan will accelerate or require approval for assumption.
- Don’t list or sign sales contracts until you confirm title issues and the estate’s ability to close.
- Keep detailed records of all estate transactions, communications with the lender, and court filings.
- If sale proceeds won’t cover debts, discuss a possible short sale with the lender and get any agreement in writing.
- Consider hiring a probate attorney and a real estate agent who handle estate sales. They speed the process and reduce legal risk.
- Notify heirs and creditors per probate rules so you avoid surprises and challenges later.
- If heirs want to keep the house but cannot pay off the mortgage, consider buyout calculations or refinancing into the heir’s name (with lender approval).
- Be mindful of timing: mortgage payments, property taxes, and insurance remain the estate’s responsibility until sale or transfer.
If you need help applying this general guidance to your situation, a local probate attorney can explain Indiana-specific steps, prepare petitions for court approval if needed, and coordinate with lenders and title companies.