Selling a property in probate can be a confusing and tiring process – especially after losing your loved. If your loved one recently passed away, you may have to prepare yourself to go through the probate process in California.
Probate helps distribute a deceased individual’s assets fairly and follow their wishes when a will is left. Going through probate may establish the validity of a will (if there is one), changing the title to real property, and verifying ownership of assets like stocks, bonds, or bank holdings. But some things aren’t probated, like in instances where the right of survivorship exists, i.e., if there is a joint owner of a property or a life insurance policy that cites beneficiaries.
In this article, we’ve compiled some helpful information regarding selling a house in probate with major focus on the State of California.
What is a Probate Sale?
A probate sale is put on by the probate court. When a person passes away without a will, their estate is distributed via intestate rights. Intestacy refers to the legal process by which probate court reviews the deceased person’s assets and heirs to determine how much each heir receives from the estate, the debts to be settled, and what to do with the remainder of the estate (if any).
A probate sale occurs when the court puts the property up for sale in the market. The court, like in any other sale, will try to fetch the best price for the property (but that does not always occur, similar to the result found in foreclosure sales).
According to California Probate Code 10309, a property going through probate must sell for at least 90% of the appraised value within one year prior to the sale. If an offer of at least 90% of the appraised value is received on the property, and the Executors are satisfied with it, a court hearing date is set.
How Does Selling a House in Probate Work?
Below is a typical step-by-step process when it comes to selling a house in probate in the state of California.
Step 1: Appointment of the Executor or Administrator of the Estate
Usually, the decedent will name the executor who is responsible for handling the distribution of assets including real property to the beneficiaries. However, in the event that no executor is named in the will or the named executor is unwilling to serve or if there is no will, the court appoints an administrator to carry out these duties.
The executor or administrator is the person who has the authority to sell the property and a sale cannot proceed until an executor is named. If there are no disputes from the beneficiaries, then the attorney will file for the Independent Administration of Estate Act (IAEA) for permission to proceed with the sale.
Step 2: Prepare the Property for Sale
Oftentimes there is a significant amount of deferred maintenance on a property that is in probate. If not properly dealt with it can have a significant impact on the bottom-line proceeds of the sale. If the executor doesn’t have experience working with contractors to repair the property and bring it to selling standard, then it would be wise to hire a local realtor to handle the process of preparing the property for sale.
Step Three: Establish the Asking Price
Ultimately, the executor will be the one to establish the asking price which will take into account the appraisal from the probate referee and the recommendations of a local real estate agent. A simple way to establish the asking price is to review comparable sales in the neighborhood within the last 6 to 12 months. In California, the administrator or executor must sell the property for at least 90 percent of the appraised value.
Step Four: Marketing the Probate Property for Sale
The probate attorney or the court appointed representative must give notice to any beneficiaries of the intent to sell the property. The property must be listed and fully marketed to ensure that it is sold for the highest and best price. When marketing a probate property, it is important that you involve the service of a local realtor to handle the process. Interview several real estate agents and find out their marketing strategy and success rate with selling houses in probate.
Step Five: Making an Offer and Acceptance
In the case of a probate sale subject to Court confirmation, a 10 percent deposit is usually required at the time the offer is made. The Court requires a cashier’s check in the amount of 10% of the accepted offer at the confirmation hearing. Sometimes attorney for the Administrator will accept a 3% or 5% deposit at the onset, with an additional 7% required prior to the court date. The estate representative will then review any offers and accept or counter the offer, just like with any other property sale.
If there is Court confirmation required, even after acceptance, the offer is subject to confirmation at Court and overbid. Even though the seller may have accepted a buyer’s offer, the seller is not committed to that buyer or their offer. The buyer may do whatever inspections that are part of the contract but before the estate representative, through their probate attorney, petitions the court to confirm the sale, all contingencies must be removed.
The attorney must advertise a Notice of Sale three times to all the connected beneficiaries to come forward. Then after an offer has been accepted there is a required Notice of Proposed Action, giving the known beneficiaries the terms of the accepted offer. Technically a beneficiary could object to the terms of the offer. Only after the required notices have been delivered and the time period for responses past, can a court date be requested.
Step Six: Wait for Confirmation
Once the sale date for the court confirmation hearing has been set, the parties now must wait. Due to the backlog in the courts, this can sometimes be set at a date a couple of months later. During this time, the court requires that the details of the confirmation hearing, including the date and location of the hearing be noted in the MLS, with a continuation of advertising and marketing.
The price is revised to be the amount of the first overbid amount, which is computed by the Court. The amount is calculated based on the accepted offer price: 10% of the first $10,000 or $ 1000 plus 5% of the remainder. The total becomes the new probate price.
Step Seven: Sale Confirmation
In order for the sale to be confirmed, the court requires that the listing agent, plus any other interested party, come to probate court to confirm the sale. If the buyer wants to try to outbid any other bidders, the buyer must also come to court to overbid. Anyone wishing to bid at Court, must have a cashier’s check, made out to the Estate, for 10% of the amount of the first overbid. That check must be shown to the Bailiff before the party is allowed to participate.
The property is then sold auction style with the opening bid being the first overbid amount. The increments to raise the bid are set by the Judge at the time of the Hearing. Depending on the number of bidders present, the Judge can set the increments in any amount. In the case of a successful overbid by another party, the deposit from the original buyer is returned within 10 days.
This is a personal blog. Any views or opinions represented in this blog are personal and belong solely to the blog owner and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated.
All content provided on this blog is for informational purposes only. The owner of this blog makes not representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information for the availability of this information. The owner will not be liable for any losses, injuries, or damages from display or use of this information.