Can the sale of “estate” property be subject to upset bids?

QUESTION: I’ve been approached by someone who is acting as the executor of his brother’s estate. He explained that his brother had a lot of debts when he died, and that the clerk of court has ordered the property be sold by private sale in order to generate funds to pay his deceased brother’s debts. He wants to list the property with me. The attorney who is helping him with the estate said that any sale of the property will be subject to upset bids. I’ve heard of upset bids, but I thought they only applied to foreclosure sales. Is the attorney right? If so, how do I handle the listing?

ANSWER: Yes, the attorney is correct. Property sold at either public or private sale for the payment of debts and other claims against a decedent’s estate are conducted in accordance with the provisions of Article 29A of Chapter 1 of the NC General Statutes. Sections 1-339.33 through 1-339.40 cover private sales. Section 1-339.36 provides that private sales are subject to the same upset bid process as public sales. After a sale is reported to the clerk of court, an upset bid may be made by delivering to the clerk a deposit in an amount greater than or equal to five percent (5%) of the amount of the upset bid but in no event less than seven hundred fifty dollars ($750.00). If no upset bid is submitted within 10 days after the report of sale or the last notice of upset bid is filed, the sale may then be confirmed.

If you decide to take the listing, the fact that any sale is subject to upset bids is clearly a material fact that you will have to disclose to prospective buyers. Also, any contract that the seller enters into should contain attorney-drafted wording that will relieve the seller of any obligation to complete the transaction if an upset bid is filed and the property is ultimately sold to the person filing the upset bid. Are you entitled to your commission if the property is ultimately sold to someone other than the buyer who initially put the property under contract? According to our interpretation of the Exclusive Right to Sell Listing Agreement, paragraph 7 is worded broadly enough to cover any such sale; however, it would be a good idea to discuss this issue with the seller up front to help avoid a later misunderstanding.

Finally, we strongly recommend that you work closely with the seller’s attorney to answer questions and to help guide the seller and you through the process.