How Does a Probate Sale Differ from a Standard Sale?
Limited Authority & Full Authority with regards to the sale of property.
For the sale of real property where the Personal Representative has been given Limited Authority, the sales process can take longer than a standard sale. An appraisal of the property by a court appointed "Probate Referee" as well as a court confirmation of the price that the property should be listed for and of the final sale price. At the court confirmation of the sale price, the home is also subject to "overbids" (see below). There is also the filing of the public notice of the intention to sell the property as well as the final sale itself. The process is detailed and can be confusing. We recommend hiring a Probate Attorney to help with the filing of all paperwork for the estate. If you need a referral, just ask. There are also specific California Association of Realtors forms that are needed for a probate sale. As well, most properties in probate have deferred maintenance or are in need of some extra preparation before they are to be sold. A Realtor experienced in selling Probate homes can best help you prepare for the sale and recommend what you should or shouldn't do to get the best price possible.
For a sale where the Personal Representative has been given Full Authority, the process is more straight forward as no court confirmation/oversight is needed. However, it is still important to hire a Realtor that understands the Probate sales process and can guide you as to how to best prepare the home for sale (whether or not to perform repairs, staging, etc..) in order to receive the highest price possible for the property. A pricing strategy should be based on a thorough comparative market analysis based on the location, condition and previous sales in the neighborhood as well as customized to the family's goals.
How Long Does it Take to Sell Real Property that is in Probate?
Depending on whether you have Full Authority (NO court oversight/confirmation needed) or Limited Authority (court confirmation needed), the process of selling a home should average about 2-4 months but could be more if the sale is contested by an heir or beneficiary.
What is a Sale Requiring Court Confirmation and “Subject to Over-bids”?
A sale of real property that requires court confirmation (limited authority) can be over-bid at the court confirmation hearing at the time when the seller brings an offer from a buyer that they would like to accept. At this hearing, even though the seller has a willing buyer, the purchase price can be over-bid by another buyer. There is a specific way to calculate the overbids (see below).
If a buyer wins an over-bid at the hearing, the buyer must be able to give the personal representative a cashier’s check for 10% of the amount of the confirmed purchase price. Also, no financial contingencies will be allowed (such as a loan contingency).
The over-bidding amount is based on the following formula:
The offer must be for an amount at least 10% more on the first $10,000 ($1,000) of the original bid, and 5% more on the amount of the original bid in excess of $10,000.
For example, if the court approves a sale price of $500K:
10% of the first $10,000 = $1000
5% of $490,000 = $24,500
Therefore, the first overbid amount would be $525,500
A simpler way to calculate this is to take 5% of the purchase price and then add $500.
How is the Property’s Value & Sale Price Determined during Probate ?
If the sale of the property is under court approval (Limited Authority) the property’s value will be determined by the Probate Referee (a court appointed appraiser). The sale price must be at least 90% of the appraised value and the sale must happen within a year of the appraisal or a new appraisal will need to be made.
When will the Heirs or Beneficiaries Receive the Proceeds of the Sale?
After the final decree is issued by the court, the proceeds of the sale, along with the other assets of the estate will be distributed. Usually about 12 months after the first probate hearing.
Must I do Repairs or Upgrades on the Property?
You do not have to do any repairs or upgrades to the home, however doing some may help you receive higher offers. This of course is on a case-by-case basis and can be discussed more in depth after the Realtor seeing the home and discussing with the personal representative the goal of the heirs and beneficiaries.
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 on this page. Upon request, we would be happy to refer you to experts in this field.
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