In California, the process of selling real estate through probate involves a series of steps regulated by the court. Because the court is involved, you will encounter a number of legal terms during the transaction (see the De-Jargonizer). Probate and trust sales also use specialized forms and disclosure documents that are different from standard real estate sales.
These are some of the steps involved in a typical probate real estate sale:
Get Authority to Sell
- Identify Personal Representative. Before probate real estate can be sold, the court must identify the Personal Representative who will handle the distribution of assets, including real estate. In most cases, the will names an Executor. If there is no Executor, the court appoints an Administrator to carry out these duties. The Executor or Administrator (called the Personal Representative) has the authority to list and sell the property.
- Determine Price. The Independent Administration of Estates Act (IAEA) allows the Personal Representative to establish a listing price for the real estate. The Probate Referee (appointed by the court) provides an appraisal of the value of the property as of the date the owner died, which may be different than the current market price. We will provide recent market data (at no cost or obligation) to assist you in accurately determining the property's current value.
- Select Agent/Broker. After meeting with us to discuss the best approach to selling the real estate for which you are responsible, you (as the Personal Representative for the estate) select us to sell the property.
Market the Property
- Advertise Property. Your real estate agent attracts potential buyers to the property. Usually this includes posting a sign, internet advertising, open houses, and showing the property to interested buyers. We'd love to meet with you to share the unique marketing approach we use to attract the highest offer.
- Prepare Home For Sale. It may help to make some improvements to the condition or appearance of the property to get the highest offer. We can recommend reputable service providers, if needed.
Negotiate an Offer
- Receive Offer. Buyers submit an offer using a Probate Purchase Agreement, which advises them of the special circumstances of purchasing a probate property. We will assist in negotiating terms that are satisfactory to both the Personal Representative and the buyer.
- "Accept" Offer. For sales requiring court confirmation, the best offer is conditionally "accepted" by the Personal Representative. This purchase agreement is not binding on the estate until confirmed by the court. The accepted offer must be at least 90% of the Probate Referee's appraised value for the property. If the Referee's appraisal is too high or more than 1 year old, it may be updated or corrected and re-filed.
- Notify Heirs. A Notice of Proposed Action is mailed to all heirs, describing the terms of the proposed sale. The heirs have 15 days to review the notice and submit any objections. If the Personal Representative has full independent powers under IAEA and there are no objections from the heirs, the sale may proceed without a court hearing. If the Personal Representative has been granted only limited powers or if one of the heirs objects to the Notice of Proposed Action, a confirmation hearing by the court is necessary. In certain situations, the Personal Representative may also choose to have a confirmation hearing, even when it is not required by law.
Buyer Removes Contingencies
- Disclosures. The Personal Representative, provides the required disclosures about the property to the buyer for their review. Often the Personal Representative is not familiar with the real estate being sold and is not able to provide complete information about the condition of the property.
- Financing. The buyer gets approved for a loan sufficient to purchase the property.
- Inspections. The buyer has the real estate inspected, at their expense. Many probate properties are sold in "as-is" condition, so the buyer needs to carefully inspect the property.
- Title Report. The buyer reviews the preliminary title report.
- Remove Contingencies. For sales requiring court confirmation, the buyer must be satisfied that they really want to purchase the property and they must remove any contingencies in the "accepted" offer before the court will confirm the sale.
Get Court Date
- Schedule Confirmation Hearing. When an offer is accepted subject to court approval, the attorney for the estate applies for a court date for the confirmation hearing. (Depending on the court schedule, it is generally about 30-45 days later.)
- Provide Hearing Notice. The attorney arranges for notice of the hearing to be published in a local paper and provides personal notice to specific individuals, such as heirs.
Continue to Market the Property
- Back-up Buyers. While removing contingencies in the purchase agreement, the buyer may decide not to purchase the property. Continued marketing will let other interested buyers know they may still have an opportunity to purchase the property.
- Overbid. If the sale requires court confirmation, the purchase agreement is not binding on the estate until confirmed by the court. Until then, in an effort to obtain the highest and best price reasonably attainable for the real estate, your agent will continue to market the property to potential buyers willing to bid more than the current offer at the confirmation hearing.
Consult with Potential Overbidders
- Overbid Requirements. If the sale requires court confirmation, other buyers may be interested in bidding more for the property at the confirmation hearing. We will advise them of the process and requirements.
- Unconditional Offer. Any person who bids in court must make an unconditional offer (that means obtaining financing and approving inspections should not be a condition of the offer).
Confirmation Hearing
- Minimum Overbid. During the court confirmation hearing, the previously accepted offer may be overbid by another buyer. The minimum first overbid price (for property over $10,000) is 5% + $500 more than the original purchase agreement. (If the accepted purchase agreement is for $100,000, the first bid allowed will be $105,500.) If there is an overbid, the court will determine any further incremental overbidding amounts, (for example, $1,000 or $2,000). The highest bidder is confirmed by the court to purchase the property.
- Deposit. Anyone planning to overbid must appear at the hearing with a cashier's check in an amount totaling at least 10% of the minimum overbid price in order to successfully overbid. If a buyer does not complete the purchase after a court confirmed sale, the buyer may lose his/her deposit.
Open Escrow
- We will open escrow upon receipt of the buyer's deposit.
- It takes approximately 30 to 45 days from the court hearing to complete the escrow process.
Complete Sale
- The estate gets the money and the new owners get title to the property and the keys.
The information above is a general overview of probate sale procedures in California. It is not intended as legal advice. Contact an attorney for information regarding your particular situation.
If you need help selling real property through probate, trust or conservatorship, let our team of qualified, caring experts assist you. We specialize in listing and selling probate and trust real estate.
Call about our Probate & Trust Real Estate Services at 310-707-8762 today.
