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Selling Real Estate Through Probate in California

December 11 2018
December 11 2018

A death in the family is hard enough on its own, but add the process of probate to the mix and you have a heartache and a headache all wrapped into one. So what is required in the State of California to sell real estate through probate? Well, let’s take a look at the process and break it down to make it a bit easier to understand and deal with.

 

Once an administrator or executor of an estate has been appointed, they will begin the process of assessing and managing all the assets of the estate, which includes real estate. If they choose to sell some or all of the real property, then there are steps required before listing the property.

 

The first item of business is to determine if the probate will be a formal or informal process. A formal process requires every step of the sales transaction to be approved by the court and can be a lengthy process, typically taking more than 6 months in the state of California. It will also require an attorney, further increasing the cost of the probate. (Probate attorneys charge a statutory fee in California based on the value of the estate based on Cal. Probate Code §§ 10810, 10811). Given the high price of real estate, this can add up. They will charge 4% of the first $100k, 3% of the next $100k, 2% of the next $800k, and 1% of the next $9m.

 

In a formal probate, the executor is required to get an appraisal prior to sale. This appraisal will be the basis for the asking price (and the property will be required to sell for a minimum of 90% of this appraisal estimate). The executor will then petition the court for the sale. After the court hearing, the property can be formally listed (as a probate sale). 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 who will have 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—or overbidding— process. (NOTE: The first minimum overbid is a minimum of 105% of the original accepted offer, plus $500. Subsequent bid increases are set by the court, and are typically set at $5000 to $10,000 intervals.) At the end of the hearing, a final buyer is confirmed by the court. The executor can then complete the sale in the normal fashion.

 

Informal probate is allowed under the Independent Administration of Estates Act (IAEA). This process can be used if the real estate was owned in joint tenancy with someone else, as survivorship community property with his or her spouse, or is in a living trust. While the court is still involved, there are fewer hoops and restrictions on the executor and an attorney is not 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 the estate’s assets and functions associated, from bank accounts, to paying bills, to selling real estate. During the process, a myriad of forms will need to be completed and filed with the court, but all are available online with instructions.

 

The executor can then list and sell the house in the typical way with no court interference and no bidding auction.

 

There are pros and cons to both formal and informal probates and the decision on which to use is dictated by the amount 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 and needing assistance with the probate sale of real estate, I have experience working with these more complicated sales and the required paperwork.

Please feel free to contact me at 415.283.7919. or Kevpick811@gmail.com

 

Disclaimer: In no way should this be considered legal advice. It is always best to consult with a legal professional when dealing with issues discussed in this article.  Upon request, I would be happy to refer you to experts in this field.


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