Selling a house in California while the estate is in probate
California regulates certain aspects of the sale of real estate when an estate is going through probate, including how it is sold, how it is priced, and how quickly it must be sold.
The actual sale can be done through a real estate agent, a private sale, a public auction, a private auction, or a trust.
Some sales require confirmation from the court, while others can proceed without the court’s OK as long as the estate’s representative is granted authority through the Independent Administration of Estates Act (IAEA).
In California, the terms of the transaction are heavily regulated, and the sale must also be approved by the court.
For instance, the specific rules vary from county to county, the sale price typically would have to be at least 90% of the value appraised within the past year.
California’s time limit during which sales must be made operate on a “90-day rule”: an initial 90 days, with the option for additional 90-day extensions.
After your loved one has passed away, you may want to—or be required to—sell some of their real estate or other property as part of probate. If you’re in California, this will require a specific process, because of the particulars of state law.
California’s probate sale regulations affect everything from the way the home or property is sold to how it is priced and the time limit for sales to take place.
Once it’s been decided that an estate will involve a probate sale, there are many things to consider—and laws to familiarize yourself with—before you begin selling the real estate your loved one owned.
The 5 ways to conduct a probate sale in California
Through a real estate agent. The most common way to sell any property during probate is through a real estate agent. It’s not only the easiest way to go about it, but it takes one more thing off the to-do list of the executor or the estate’s administrator.
The representative of the estate can either choose a real estate agent or probate broker to handle the sale or accept a recommendation of a real estate agent from the probate attorney to take care of it.
While it’s not required that the administrator follow the probate attorney’s suggestion, considering their experience in these things, it might not be a bad idea.
Although the real estate agent will list the property at market value, if the property needs some work, it’s recommended that you take care of that before it’s listed.
Probate real estate agents will also need to carry out a “complete and competent diligent visual inspection of the property,” and disclose any factors that might impact the value of it.
The agent of whoever buys the property will have to do the same. Whatever is found during the inspection must be written on an Agent Visual Inspection Disclosure form, so the buyer knows what they’re getting into.
Through a private sale. If it makes more sense for the situation or you simply want to skip using a real estate agent, a private sale is another option when selling property under probate. In these cases, the property is listed in legal newspapers and the attorneys take care of making sure the sale goes smoothly. Private sales involve a bidding process and once the bidding is over, the attorney opens the sealed bids, and the property goes to the highest bidder.
Through public auction. A public auction is another bidding process to sell the property. In these cases, a notice about the upcoming auction, including the date and time of when it will take place, is posted in legal newspapers. Those who attend call out their bids, like a traditional auction and, again, the highest bidder wins.
Through private auction. A private auction is very similar to a public auction in the process it follows in selling the property. The only difference is it’s done privately through an auction company.
Through a trust. If the property was placed in a trust, then the trustee has the authority to make the decision as to how the property will be sold without having to go through the court system.
Court supervision of probate sales
There are two types of probate sales in California: one that requires confirmation from the court and one that can proceed without the court’s further say as long as the estate’s representative is granted authority through the Independent Administration of Estates Act (IAEA). IAEA status can be achieved by filing the necessary paperwork with the court to seek permission to move forward.
However, not everyone who applies for IAEA will be granted the full authority they’re requesting. Some wills may prohibit that IAEA be administered to anyone, even their chosen executor.
In other instances, interested parties or heirs may step forward with good reasons as to why IAEA shouldn’t be granted—for example, if the person in question isn’t reliable, untrustworthy, or up to the task. This could lead to either limited authority and no authority at all, leaving the whole process in the hands of the court.
In either case, if a probate sale is to take place, the estate’s representative must alert all heirs via a copy of a “Notice of Proposed Action.” At this point the heirs have 15 days to object to the proposed sale. If no one objects, the sale can proceed.
If the representative doesn’t want to wait 15 days and move forward with the sale, all the heirs must agree and sign a “Waiver of Notice of Proposed Action.” If an objection to the sale should arise and it can’t be overturned by the executor, then the sale will need to go to court so it can be confirmed there.
How the price of the property is determined
No matter who’s been put in charge of handling the probate sale, there are rules as to how much the seller can ask for the property. Unlike a regular sale of a house or property where people may list it for a higher value in the hopes of getting more or getting at least what they want, a probate sale has restrictions.
Not only does the court require confirmation that the selling process can begin, but the terms of the sale must also be approved by the court. In California, this varies from county to county and isn’t a state-wide law. But once the property is put on the market, an offer to purchase must be at least 90% of the appraised value and that value should be based on an appraisal that has been made within a year before the sale so that it’s up to date.
When an offer is accepted, it must be confirmed by the court. The confirmation of the sale can only be established when the representative of the estate petitions the court. In most cases, the date for the hearing is set anywhere from 20 to 40 days following the initial petition.
Although an offer has been accepted, people still interested in the property can attend the scheduled hearing and bid on the property.
In order to open the bidding process at the hearing, there must be a bid that’s 5% or more over the original bid, plus $500. The bidding can go on until the court decides on a bid that’s both the highest and obtainable.
In other words, a bid of $1 million on property that’s not worth more than $100,000 wouldn’t be considered obtainable. Once the sale is confirmed to the highest bidder, a 10% deposit on the purchase price must be made.
However, if the probate sale is handled by the executor under IAEA, it doesn’t need to abide by the same rules and can be sold in the same way a non-probate sale would occur.
Whatever the purchase price ends up being, property sales through probate do not require a deposit unlike traditional sales. Despite this, whoever is overseeing the sale may request a 10% deposit, but it’s not California law to request or even require a deposit. It’s up to the representative.
How quickly property must be sold
If the representative chooses to work with a real estate agent, they give that agent the exclusive rights to handle the sale for no more than 90 days. But, should the property not sell in 90 days, the real estate agent and the estate’s representative can agree upon no more than two 90-day extensions, which must be approved by the court.
If the representative has full authority over the sale under IAEA, there’s no need to seek the court’s approval. But while this may be the case, there are still restrictions under IAEA in regards to a time limit.
For example, if 270 days go by without the property being sold, the executor or representative is required to notify the court with a Notice of Proposed Action in order to secure more extensions. If the representative only has limited authority when it comes to the sale, it must be supervised by the court.
When it comes to IAEA property sales in California, the state uses the California Association of Realtors standard when it comes to listings. When the property is listed, it must include a probate listing addendum and probate advisory attachment, so buyers know, beforehand, that while it’s a residential listing, it’s still a probate sale.
The 90-day listing rule applies to all probate sale listings, even those who were granted full authority under the court. But, again, extensions can be agreed upon if necessary.
Although probate sales in California may seem like a lot of work at first glance, if you follow the steps and know what role you play in the process, it doesn’t have to be complicated.
But because you’re going through a difficult time, cutting out the extra leg work and getting a probate real estate specialist might not only be the easiest route to take, but it’s one less stress you need to worry about after losing someone you love.
You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.
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