Can a decedent’s house be sold during probate when a mortgage remains? — Wyoming
Detailed answer — how this works under Wyoming law
Short answer: Yes — a decedent’s house can be sold during probate in Wyoming even if a mortgage remains, but the sale must be handled through the estate and usually requires either authority in the will or court approval. Any outstanding mortgage is a secured claim against the property and generally must be paid from sale proceeds or addressed with the lender before the buyer receives clear title.
Who controls the sale? The personal representative (sometimes called executor or administrator) controls the estate’s real property once appointed by the probate court. If the will expressly gives the personal representative authority to sell real estate, the representative can usually sell under that authority. If no will or no sale authority exists, the representative will typically need the court’s permission to sell real property.
Why the mortgage matters: A mortgage is a lien recorded against the property. A sale does not automatically eliminate that lien. To deliver marketable title, the estate must either:
- Pay off the mortgage at closing from the sale proceeds,
- Have the buyer assume the mortgage (if the lender allows assumption), or
- Obtain the lender’s written release or agreement (e.g., a short sale agreement) so title transfers free of the lien.
Priority of claims: Secured creditors (mortgage lenders) are generally paid from the property’s value ahead of unsecured creditors and distributions to heirs. The personal representative has a duty to give notice to creditors and to pay valid claims before distributing assets.
Where Wyoming law speaks to this: Wyoming law governing wills and decedents’ estates (Title 2, Wyo. Stat.) sets out the duties, powers and procedures for personal representatives, including sales of estate property and notice to creditors. Property and recording law (Title 34, Wyo. Stat.) governs liens, mortgages, and priorities. You can review the Wyoming statutes for more detail:
Typical scenarios
Scenario A: Will authorizes sale — If the will names a personal representative and authorizes sale of real property, the representative usually may list and sell the home during probate. The closing will use sale proceeds to pay the mortgage and other valid claims before distribution.
Scenario B: No express authority or intestate estate — If there is no will or no express sale authority, the representative should petition the probate court for an order authorizing the sale. The court will consider whether the sale is in the best interests of creditors and heirs.
Scenario C: Lender consents to a sale short of payoff — If the mortgage lender agrees to a short sale or to let a buyer assume the loan, the sale can proceed without the full payoff. Lender consent should be in writing and documented in closing paperwork.
What must the personal representative do before and at closing
- Be appointed by the court and have letters testamentary or letters of administration in hand.
- Confirm whether the will authorizes sale or obtain court approval if it does not.
- Provide required creditor notice under Wyoming probate rules so creditors can file claims.
- Obtain a mortgage payoff statement and work with the lender about payoff at closing or assumption terms.
- Use sale proceeds to pay secured claims (mortgage), necessary estate expenses, taxes, and approved creditor claims in the order required by law.
- File appropriate receipts and accounting with the probate court and distribute remaining proceeds to heirs or beneficiaries according to the will or Wyoming intestacy rules.
Risks and common complications
- If the personal representative sells without proper authority, the sale can be voided or the representative may be personally liable.
- If a buyer receives property subject to the mortgage (without payoff or lender release), the buyer may be at risk of foreclosure if mortgage payments are not made.
- Creditors may file claims against the estate; unresolved claims can delay distribution and complicate closing.
- Homestead allowances, spousal and family allowances, and priority claims can reduce sale proceeds available for distribution. Wyoming’s probate statutes discuss allowances and claims — check Title 2 for specifics.
Practical options for heirs or beneficiaries
- Allow the estate to sell the house through the personal representative and use proceeds to pay the mortgage and distribute remainder.
- Buy the property from the estate — buyer may need to pay off the mortgage at closing or assume the loan with lender approval.
- Arrange a short sale or deed-in-lieu with the lender if the mortgage balance exceeds market value (requires lender approval).
- Let the lender foreclose if payments stop — not usually desirable because it reduces estate value and can harm heirs’ interests.
Bottom line: Selling is feasible, but you must follow probate procedures and deal with the mortgage as a secured creditor. Work with the probate court’s requirements, notify creditors, coordinate with the mortgage lender, and get written court orders or authority when needed.
Helpful hints
- Confirm appointment: Don’t list or sign a sales contract until the personal representative has official appointment documents (letters testamentary or administration).
- Get a payoff statement: Request a written mortgage payoff from the lender so title can be cleared at closing.
- Check for homestead or family allowances: These can affect how much proceeds are available for creditors and heirs.
- Ask for court approval in writing: If the will doesn’t authorize a sale, petition the probate court and get an order authorizing the sale to avoid later challenges.
- Talk to the lender early: Lenders often have specific procedures for probate sales, short sales, or loan assumptions — start that conversation as soon as possible.
- Keep records: Document notices to creditors, sale contracts, payoff statements, and court orders for the estate file and for the probate court’s accounting.
- Consider a local probate attorney: Probate sales and mortgage issues can be technical. An attorney can prepare petitions, get necessary orders, and coordinate closings.
Relevant Wyoming statutes (general reference):
- Wyo. Stat. Title 2 — Wills; Decedents’ Estates (personal representative duties, creditor notice, sales of estate property)
- Wyo. Stat. Title 34 — Property (mortgages, liens, recording and priorities)
This is general information only and does not constitute legal advice. Laws change and every case is different. Consult a Wyoming probate attorney or your county probate court for guidance about your specific situation.