The process of selling real estate through probate, trust or conservatorship are a series of court-regulated steps that must be carefully monitored and managed.  

 

Deadlines, specialized documentation and the Court’s oversight must be honored throughout the marketing, negotiations and sale of the property.

 

In addition to the personnel of the court, the sale generally involves the Executor or Administrator of the estate, the attorney representing the estate, a real estate agent representing the seller (the estate), one or more buyers who place offers and/or bids with the court and the buyers’ real estate agents. Each of these individuals must follow the guidelines and deadlines of the court.

 

Because of the involvement of the court, probate trust & conservatorship sales have a vocabulary all their own.  They also involve various disclosure documents and contracts that are not used in other real estate transactions.

 

 

The Beginning:

 

• Petition for Probate – starts the probate process

  • Indicates the Personal Representative, the estate assets, next of kin, etc.

• Order for Probate -  The order of the Probate Court Appointing the Personal Representative

  • Not  effective until Letters have been issued

• Appointment of the Administrator or Executor of the estate (Appointment of the Fiduciary)

  • In most cases, the decedent’s will names an Executor who is designated to handle the distribution of assets, including real property.

• If no Executor is named, if 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 list and sell the property; the sale cannot proceed until that person has been identified.

  • The personal representative is charged with the fiduciary responsibility of gathering the assets and paying the debts of the decedent in such a way that the beneficiaries or heirs of the decedent receive the maximum inheritance. The personal representative usually will hire an estate attorney to handle the legal aspects of the probate.

• Letters for Probate

  • This form serves as the oath of office for the personal representative and may be given to anyone who needs proof that you have been appointed as the personal representative and have authority to act on behalf of the estate.

• What happens if an emergency arises before a personal representative is appointed --Appointment of a Special Administrator:

  • It generally takes four to six weeks from the time a petition for probate is filed until Letters can be issued to the personal representative. If an emergency situation exists so that appointment is urgently needed before the Petition for Probate can be heard by the Probate Judge, the estate attorney may file a separate Petition for Letters of Special Administration. Letters of Special Administration are temporary Letters that can be approved by the Probate Judge for a specific purpose on an ex parte basis (without a hearing).

  • Does the Administrator or Executor Have Full Authority?

  • The personal representative is given full authority under the Independent Administration of Estates Act (IAEA).

• Do I need to file a bond?

  •  A bond is required of all personal representatives to protect interested persons, including beneficiaries and creditors, against the wrongdoing of the personal representative.

  • A bond is not required if the Will waives the bond requirement, or if all beneficiaries sign a waiver of the bond requirement and the written waivers are attached to the Petition for Probate.

  • The court will ordinarily require a non-resident personal representative to file a bond even if the Will waives bond.

  • Bond can be reduced by requesting limited authority so that real property cannot be sold without a court order.

• A Probate Referee is assigned

  • In California, the probate referee serves solely as an appraiser of the estate property, such as promissory notes, art, intellectual property, real estate

  • Referees are usually attorneys, certified public accountants or professional appraisers.

• Set the Sales Price

  • As provided in the Independent Administration of Estates Act (IAEA), the Executor establishes a list price for the real property.

  • The price takes into account the appraisal by the Probate Referee and is usually determined with the assistance of a real estate agent experienced in probate and trust sales.

• The property is then listed for sale through that agent/broker.

  • Probate Listing Agreement may not be for more than 90 days

  • 90 day extensions are allowed.

• Market the Property

  • The real estate agent markets the real property to the public as aggressively as possible to attract the highest offer.

  • This generally involves a number of approaches, including signage, newspaper advertising, listing on one or more real estate websites and hosting open houses for other real estate agents and potential homebuyers. The real estate agent will also schedule appointments to show the property to interested parties who inquire directly.

• Limitation of a Buyer’s Offer

  • While buyers of probate and trust real estate may be looking for a bargain, their range of offers are limited by the court.

  • An accepted offer must be 90% or more of the Probate Referee’s appraised value.

  • Once a buyer is found, the real estate agent assists the seller in negotiating terms that are satisfactory to both parties.

• Accepted Offer/ Notice of Proposed Action

  • When the property has an accepted offer, a Notice of Proposed Action is mailed to all heirs, simply stating the terms of the proposed sale.

  • Publish the Notice of Sale

  • A Notice of Sale must be published prior to the sale of estate real property unless the will directs the real property to be sold or gives authority to the personal representative to sell the real property.

  • The Notice of Sale provides the public with required information concerning the sale and will typically be handled by the attorney for the estate. 

  • A Notice of Sale of real property must be published at least three times over a period of not less than 10 days before the sale, with the third publication at least five days after the first (Cal. Prob. Code § 10300; Cal. Gov’t Code § 6063a).  All publications must be in a newspaper published at least weekly in the county in which all or some of the property is situated.

  • Certain sales are exempt from this requirement, most importantly, sales under the IAEA (Cal. Prob. Code § 10503—the property may be sold with or without notice).

  • The heirs have 15 days to review the notice and pose any objections.

  • If there are no objections, the sale may proceed without a court hearing.

• Compliance of State Disclosure Laws

  • Agency Disclosure

    • If the estate real property consists of one to four residential units (including mobile homes) and is to be the subject of a sale, exchange, land contract, or lease exceeding one year, compliance with the agency disclosure laws is required.  (Cal. Civ. Code § 2079.13(j).)

  • Probate Advisory

  • Mandatory Seller Disclosures

    • Sellers of estate real property (and mobile homes) are exempt from the requirement of providing prospective buyers with a Transfer Disclosure Statement (Cal. Civ. Code § 1102.2(b)).

    • This does not, however, relieve the seller from disclosing any known material facts regarding the value or desirability of the property.

    • Local county, city and neighborhood disclosures.

  • Suggested Seller Disclosures

    • When in doubt -- Disclose, Disclose, Disclose!

• Court Confirmation Required

  • If the Executor/Administrator does not have full independent powers under IAEA, or if one of the heirs poses an objection to the Notice of Proposed Action:

  • Notice of the sale must be published in a generally distributed local newspaper (unless the will does not mandate such action).

  • The attorney for the estate then applies for a court date (the “confirmation hearing”) when the sale will be executed.

  • The court date is usually within 30 to 60 days of the date the application is filed.

  • A copy of the application and details concerning the sale are mailed to all interested parties.

• Over-Bidding

  • Even after the court date has been set, the real estate broker should continue to show the property and advertise the home to potential buyers in the hope of securing an “over-bidder” and thereby raising the sale price.

  • During the court confirmation hearing, the previously accepted bid may be overbid by another interested party.

  • In such a case, the overbidding party 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.

  • The minimum overbid is determined by the following formula: 10% of the first $10,000 plus 5% of the balance of the accepted offer.

  • EXAMPLE: A property is listed at $200,000. The accepted offer is $175,000.

    • The minimum overbid is calculated as follows:

    • Accepted offer=$175,000

    • + 10% of the first $10,000=$1,000

    • + 5% x $165,000=$8,250

    • Minimum overbid=$184,250

    • Amount of cashier’s check  to be 10% of $184,250=$18,425

  • If there is more than one over bidder, the judge will determine the incremental bids ($5,000, $10,000, etc.)

  • The highest bid ‘wins.’ The winning bidder gives a cashier’s check to the Executor/Administrator and escrow is opened.

  • Buyer must take property as is, without any contingencies.

• Escrow/ Closing

  • Buyer’s financing is finalized.

  • Deeds are signed and notarized by both parties.

  • Escrow will close approximately 30 to 45 days from the court hearing.