Probate administration can be stressful, costly, and generally not fun. It comes when people are already grieved over losing a loved one, and it can involve jumping through a lot of administrative hoops. Therefore, when people are planning the proper distribution of their assets in their estate plans, they often try their best to help their loved ones avoid probate. This especially applies to sales of real property in probate.

Sales of real property in probate estates go beyond just selling off property. The sale of a real estate asset that is subject to probate isn’t like a normal property sale; it’s a long legal process that involves lots of court authorization and documentation. But for many estate owners, the main objective of estate planning is helping their family (who will already be mourning) avoid the financial and emotional strain of probate. How can that be applied to the often convoluted process of sales of real property in probate?

In this article, we strive to answer that question. We’ll examine the procedures, documents, and authorizations needed to run a smooth real estate transaction both in a formal probate process and informal probate process. By following these steps, you can make sales of real property in probate as quick and painless as possible.

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“A People’s Choice helped us throughout our entire year-long probate making the process very easy and manageable while at the same time saving us thousands of dollars in lawyer’s fees. Not only were they extremely friendly and fast to respond to our questions but they made the process simple enough that we hardly ever had to contact the courthouse directly and we even had a hearing done without an appearance. Would highly recommend A People’s Choice to anyone!”

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“I can’t say enough about the level of service and professionalism I received working with A People’s Choice. Emails were always responded to quickly and thoughtfully. They really care about the process and helping you get the best result with no up-selling. Of course, they can’t provide legal advice, but I was referred to an attorney when I needed some questions answered who was very reasonable and easy to get a hold of as well. The process played out according to plan and I ended up saving a lot of money by going with A People’s Choice over an attorney.”

M. Rice

What Is Real Property?

Before we get into selling real property, we should define exactly what it is. In general estate planning laws, there are two types of properties: personal property and real property. These two types of properties are essentially directly opposite of each other. This article is focused more on one than the other, but we define both for reference purposes.

The difference between real and personal property lies in mobility. Personal property is anything a person owns that is mobile or can be moved. Examples of this are automobiles, cellphones, books, clothes, and so on. This is not the same for real property, which is any property that is fixed to or associated with land, like buildings and structures. Since the term “estate” refers to everything an individual owns, it is safe to say that real property can also be called real estate.

Sale of Real Property in Probate: Full Authority vs. Limited Authority

what is probate

The truth is that many people don’t make special arrangements, like setting up living trusts, that are meant to help family members avoid probate. Therefore, many deceased person’s estates have to go through the probate administration process, be it a formal probate process or an informal one. When this happens, the executor or personal representative (as stipulated in the decedent’s will or appointed by the probate court) carries out some tasks in the administration of the estate. This includes the distribution of assets to beneficiaries, payment of debts, and, yes, the sale of some properties in the estate.

The sale of real property in the probate administration process can be simple if the decedent’s will is subject to the Independent Administration of Estates Act (IAEA). The IAEA allows for the administrator of the estate to be appointed with either full or limited authority. Whether the executor or personal estate representative is granted full or limited authority is important. It determines whether or not the real property sale in the probate process can be carried out with court supervision or approval.

Let’s take a look at the difference between these two scenarios. First, we’ll consider real estate sales or probate transactions in a full authority situation. Next, we’ll take a look at real estate sales or probate transactions in a limited authority situation.

Sale of Real Property with Full Authority

If the executor or personal representative has full authority, sales of real estate in probate are straightforward and generally much faster than limited authority sales. Since the power of sale is provided, the sale of real property can be carried out without direct court supervision. The sale typically goes through the following steps:

1. Order for probate

2. Letters testamentary

3. Listing agreement execution

4. Listing property for sale

5. Escrow activation

6. Notice of proposed action

7. Escrow closure

When fully authorized executors or personal representatives are selling real property that is in probate, the property can be sold for less than 90% of the appraised market value. This is because there is no court confirmation required and it is not necessary for the administrator to wait for the probate referee to complete the appraisal of the property before selling it. All that the estate administrator needs to close escrow in cases like this are the order for probate, the testamentary letters, and the notice of proposed action.

Sale of Real Property with Limited Authority

Unlike the sale of real property with full authority, the sale of probate property with the limited authority granted to the estate executor can go on for longer periods. This is due to the fact that the executor and certified probate real estate expert must wait for court approval and the confirmation process of the estate sale to take certain steps.

The sale of real probate property in a limited authority situation follows these steps:

1. Order for Probate

2. Testamentary letters

3. Letter of administration

4. Listing agreement execution

5. Listing property for sale

6. Escrow activation

7. Report of sale and petition for an order confirming sale

8. Notice to interested parties

9. Court confirmation process

10. Court order

11. Closure of escrow

When limited authority estate executors or personal representatives are selling real property, there are a lot more strings attached. Here are some of these restrictions.

Higher Sale Price

First, the sale price cannot be less than 90% of the reappraised value. You may recall that this is not the case with full authority sales.

Two Types of Required Valuations

Second, there are actually two types of valuations required when selling real property in probate with limited authority:

1. Final inventory and appraisal: This provides the value of the property at the time of death

2. Reappraisal for sale inventory and appraisal: This provides the current value of the property at the time of sale.

Public Notice of Sale

When selling real property with limited authority, a “Notice of Sale of Real Property” has to be published in the local newspaper of the county where the property is situated. This must be done at least three times before the sale to notify potential buyers that the property is available for public auction.

Larger Buyer Deposit

When authority is limited, the initial amount the buyer has to deposit for the purchase of the property is 10% of the actual listing price. The buyer also has to fulfill all the terms of sale before they can get legal title to the property from the title companies involved.

Overbidding on Probate Properties and How It Works in California

Probate property is a popular commodity, which makes overbidding common. When the personal representatives or executors have taken an offer with an acceptable price for a real estate property that is on sale, it’s not the end of the process. The original buyer who made the accepted offer should not assume they’re in the clear. Instead, they have to prepare adequately for an overbid process at the confirmation of sales hearing and expect several competing offers.

The bidding process is standard in probate sales. For an overbid to be accepted by the court, it must be significantly higher than the original bid (sales price) presented to the court for confirmation.

The formula for overbidding in California is: Minimum overbid formula = A+B+C

A. Original bid

B. 10% of the first $10,000 of the original bid (sales price)

C. 5% of the original bid (minus the $10,000)

Going by this formula, if the original bid on the real property is $600,000, the minimum overbid accepted by the court from any other interested real estate buyer will be $630,500.

Do You Need Probate Attorneys or Real Estate Agents for Sales of Real Property in Probate?

To ensure the successful sale of real property in probate, the estate executor or administrator might wish to seek out a probate attorney and certified probate real estate agent. It’s true that having hands from these two professions on the probate sale can go a long way in ensuring the success of the sale, especially where large properties are involved.

Just like with any property sale, a real estate agent is recommended for a probate real property sale. A certified probate real estate agent can take care of preparing real estate forms, analyzing recent market trends, recommending a list price, preparation of the probate listing agreement, and the inspection of the property, among other tasks that can’t be automated.

Unlike a real estate agent, a probate attorney may not be a must for your property sale. It might be a relief to saddle probate with the responsibility of filing all necessary documents with the court, but this can come at a significant cost. Many of the necessary documents can be handled with the aid of a legal document preparation service like A People’s Choice at a fraction of the cost.

Go Ahead with Your Probate Property Sale

Your real property probate sale will go more smoothly if you have the right resources at your disposal. A People’s Choice is your best bet when it comes to the preparation of legal documents of any kind, including probate documents. We are always dedicated to making your legal proceedings hitch-free with the provision of comprehensive, up-to-date legal documents to help you complete your legal journey at a very affordable cost.

Should you need more information about this topic, feel free to go through our other posts on probate. If you’re ready to take action, feel free to reach out to us. Our team of experts is ready to serve you!