Selling in Probate or a Trust after death
How to Sell a House During Probate
A probate sale can seem like an intimidating process to those who are unfamiliar with how it works. It’s certainly not a simple process and is one that can cause strain on a family. Fortunately, the right knowledge can help you get through it much more easily.
Real estate is sold in probate court when the owner of a property passes away. If there is no appointed heir when the owner passes, the property is turned over to the courts. The court then appoints the closest relative as the executor to sell the property.
After all the steps for selling have been completed (explained further in the sections that follow), the probate court will handle the proceeds from the sale, splitting them between any beneficiaries.
Appointment of an Administrator or Executor
If someone has been appointed in a will by the decedent, and they are willing to act as the executor, then that person is appointed as such. If there is no appointed executor, then the closest relative will be appointed as an administrator, either by the court or other relatives.
Sale of the Property
The first step to selling the home is to have the property appraised. Alta Realty Group CA will help you through this process. In a probate sale, the property must sell for at least 90 percent of the appraised value. Once the listing price has been determined, the executor can then petition the court for the sale. After the court hearing, the property can be formally listed as a probate sale.
The home is then listed for sale and marketed for exposure. Alta Realty Group CA will list the home on the multiple listing service (MLS) so that it ends up on sites like Realtor.com and Zillow. Buying agents will know that the property is listed as a probate sale.
A buyer must make an offer, accompanied by a deposit, which the sellers have the option to reject. The offer is subject to the court’s confirmation, and the seller is not committed to that buyer, even though their offer was accepted. Once an offer is made, a court confirmation hearing is scheduled. While waiting for the hearing, the sale must be advertised with the offered price in the local newspaper. This alerts other potential buyers that the property is available, allowing them the opportunity to bid for the property at the actual court hearing.
At the court hearing, if there are additional buyers, there is a bidding process, which can include the original buyer. The court conducts the bidding process. If a bidding war ensues, pushing the sale price above 105 percent of the original offer, subsequent bids will be allowed in intervals set by the court, typically $5,000 to $10,000. At the end of the hearing, the court confirms the final buyer. The executor can then complete the sale as they would for any other home sale.
Informal probate is allowed under the Independent Administration of Estates Act (IAEA). This process can be used if the property was owned in joint tenancy with someone else, as survivorship community property with a spouse, or in a living trust. Although the court is still involved, there are fewer hoops to jump through and fewer restrictions on the executor. An attorney is not typically required.
Initially, the executor will file the will and probate forms with the court. Once all is approved, the court issues Letters of Testamentary, which allow the executor to handle all of the estate’s assets, from bank accounts to paying bills to selling real estate. During the process, the executor will need to complete a variety forms and file them with the court. All of the necessary forms are available online, and most come with detailed instructions. The executor can then list and sell the house in the typical manner with no court interference and no bidding auction.
There are pros and cons to both formal and informal probate sales, and the decision on which to use is dictated by the value of the estate, how complicated it is, directives from the decedent’s will or living trust, or by choice of the executor. If you find yourself as an executor of a loved one’s estate and need assistance with the probate sale of real estate, we can help. We have vast experience with these complicated sales and the required paperwork, giving us the expertise needed to guide you throughout the process.
Disclaimer: The information contained here should not be considered as legal advice. It is always best to consult with a legal professional when dealing with the issues discussed here.
California Courts – Wills, Estates and Probate:
Here are brief definitions of some of the most common terms you may encounter in dealing with probate or trust real estate or inheritance property:
Beneficiary: A person who inherits the deceased’s assets when there is a will.
Conservator: A person who has the court-appointed fiduciary responsibility for the care of another adult.
Conservatee: The person whose care is provided for under a conservator-ship.
Conservatorship: A court proceeding wherein a judge appoints a responsible person (conservator) to care for another person (conservatee) who cannot care for him/her self or his/her finances.
Custodian of the Will: The person in possession of the will when the person who wrote the will dies.
Decedent: The person who died.
Executor: A person named in a will and appointed by the court to carry out the decedent’s wishes. This person is usually named as the seller of any real estate.
Heir: A person who inherits.
Intestate: When someone dies without leaving a will. When there is no will, the sale of the decedent’s real property often requires court confirmation.
Intestate succession: The order of who inherits the property when the decedent does not have a will.
Legatees or Devisees: People who are named in a will.
Personal Representative (Administrator or Executor): The person responsible for overseeing the distribution of the estate.
Probate: The process of deciding where, how and to whom to distribute the decedent’s estate, including any real property.
Probate Real Estate Sale: The transfer of legal title (ownership) of real property from the estate of the person who has died to his or her beneficiaries or to a buyer under the supervision of the court.
Probate Referee: Before real property can be sold through probate, it must be appraised. This is done by a probate referee. In California, probate referees are appointed by the State Controller and assigned to a particular case by the court clerk. They are paid for this service directly by the estate, usually as a percentage of the appraised value of the property.
Real Property: The term used to refer to real estate (land and buildings) in probate and trust sales.
Testate: When someone dies leaving a will.
Trust: When a person (trustee) holds property at another person’s (Settlor’s) request for the benefit of someone else (Beneficiary).
Will: A legal document that lists a person’s wishes as to what will happen to his/her personal and real property after death.