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March 27th, 2022 at 11:00 am

Exterior of Southern California home - What is the process of a probate sale?

What is the process of a probate house sale?

Whether you’re on the buying or selling end of probate property, there’s no doubt: it’s an arduous process. From 10% deposits to courtroom auctions, probate sales are fraught with unique regulations and processes. 

Working with professionals who have local experience and connections with probate professionals is key. With the right probate REALTOR® at your side, you can maneuver through challenges and meet your goals.

To get you on the right path, we’ll review the process of a probate sale from listing to closing.

What are the steps of a probate house sale?

A probate house sale brings both more players and more innings to the real estate game. Rather than an owner, the selling duties are split between an estate’s executor and the probate court. Instead of an offer acceptance committing to a sale, it’s simply the kick-off to a series of bids. 

It’s easy to find a how-to article on either selling or buying a house in probate that stays with a glass half full outlook where everything going right. Instead, we’re going to look at the process including both the selling and buying steps plus some common errors to watch out for. 

Step 1: Probate court recognizes the executor 

Whether an executor is appointed in a will, elected by family members, or self-nominated, they must petition the probate court to be recognized as the estate’s legal representative. 

Depending on the efficiency of the local court system and whether there is a dispute over the will or the appointment of the executor, this process could take days or months. The court will either confirm a proposed executor or appoint the closest relative or a probate attorney as administrator. 

This step should take place before the home is listed and marketed, but that’s not always the case. 

The buyer needs to know if an official executor is recognized by the court; if not completed, this step will cause more delay to a sale. 

#2: Executor applies for a grant of probate

The application to begin a court-recognized probate process may be submitted at the same time as the executor’s petition, depending on local probate regulations and processes. 

A grant of probate should be completed before listing a house for sale, but as with making the executor official, this is not always the case. If probate has been applied for but not yet granted, this is another potential delay of weeks or months before the sale can close. 

There are often logical reasons for listing a house before a grant of probate, such as the following: 

Listing and buying agents may not understand the difference between having applied for probate and a grant of probate. A buyer should press for confirmation including a date when the grant of probate took effect to better estimate how long the sale might take. 

#3: Executor secures a specialized listing agent

Although we’ve listed it here, there’s no time too early to connect with a skilled probate REALTOR®. Having someone who knows the ropes of probate sales in your corner can be tremendously helpful. If you’re an executor, look for an agent who has: 

At Berkshire Hathaway HomeServices California Properties, our team of probate REALTORS® are always ready to help you with the intricate process of probate house sales. Speak to one of our agents today and let’s get started!

#4: Executor secures an appraisal 

Before setting a price, the executor needs to obtain a professional appraisal to identify the property’s current market value. An appraisal is required: 

The appraiser should be familiar with probate sales, particularly their as-is nature. 

An important item to remember for both buyers and executors is that the property cannot be sold for less than 90% of its appraised value. 

Although probate properties are often sold at bargain prices due to their higher up-front cost, risk, and inconvenience, it is not uncommon to find overpriced probate houses as well. 

If an executor is trying to appease heirs with unrealistic expectations, they may be working against pressure to increase the price tag. This is especially true when proceeds will be split among several recipients who’ve started doing the math on what they may inherit. 

#5: Executor prepares the house for sale

In a standard sale, the owner often shines up the home with minor repairs, improvements, and staging. With a probate property, the seller may be legally prohibited from doing so. 

For instance, California law holds that repairs or upgrades to a property that will be sold “as is” may result in covering up issues or defects that a buyer could have otherwise seen during a viewing. This covers any type of renovations, down to a new coat of paint.

The home should, however, be emptied of its contents prior to viewings. 

#6: Agent lists and markets the house

Probate property is listed, marketed, and shown alongside the rest of the available homes for sale in an area. The probate REALTOR® will add the house to the multiple listing service (MLS). Then, it will appear on popular browsing sites, including bhhscalifornia.com

While there is no mandate to identify it as property under probate, it’s helpful to include that information in the property description including “probate” and “as-is” for keyword searches. 

#7: Buyer requests inspection access

Buyers will not have a right to secure an inspection or appraisal written into an offer on a probate property, so an ideal time for these important steps is before submitting an offer (or deciding against submitting an offer, if the reports turn up concerning information). 

Unfortunately, with a probate sale, the seller is not required to approve access for a buyer appraisal or inspection at any point. They may allow it, but often only after an offer is submitted.

If the executor refuses access prior to an offer, there are still important reasons to inspect and appraise the property. These include: 

#8: Buyer makes an offer

An offer on a home under probate has some critical differences from a standard offer. These include: 

Unlike earnest money of 1% to 5% in a standard real estate transaction, this deposit is both higher and easier to lose.

#9: Executor responds to the offer

The executor, like any home seller, may opt to respond with a counter-offer. If the offer is agreeable either immediately or after negotiation (and it is not less than 90% of the appraised value), they will provisionally accept the offer. 

The executor or administrator acts as the seller at the administrative level but does not have the legal capacity to fully accept an offer or complete a sale—that is in the hands of the probate court. 

The offer will be sent through the estate’s probate attorney, who will apply for a court date for an offer confirmation hearing. This typically takes 30 to 45 days to schedule.

#10: House is relisted at the offer price

The court is the entity that can actually accept an offer. While the potential buyer is waiting out the clock until the offer hearing, the traffic of inquiries and showings continues and the house is still considered available for sale. 

Some states mandate a relisting at the price in the provisionally approved offer or a higher level that would be a starting bid against your offer in court. In many states including California, this higher relisting price is 5% higher than the offer plus $500. 

To secure the highest sale price, the property remains listed and open for showings by real estate agents up until the court date. Potential buyers during this time would be directed to compete with the provisionally accepted offer at the offer confirmation hearing. 

#11: Offer hearing and auction

The offer confirmation hearing by the probate court performs double duty as an open property auction. The judge asks if anyone in the courtroom is prepared to bid on the property. If there are competitors present, note that: 

If a new buyer wins the auction, they must immediately provide a cashier’s check covering a 10% deposit on the final sale price. 

The original buyer with the previously accepted offer may bid against others during the hearing, but can only bid up to an amount they can cover immediately with a cashier’s check to make up the difference between their original deposit and 10% of the final sale price. If they lose the auction, their 10% deposit money is returned to them. 

#12: The court accepts the best offer

The court fulfills its guardianship of the estate by accepting the highest offer. In addition to paying the 10% deposit, the winning buyer must also provide proof of financing to complete the sale. A contract of sale is signed with no contingencies allowed. 

#13: The court notifies heirs

Once the court accepts an offer on the property, the court notifies all heirs and beneficiaries by mail. The Notice of Proposed Action states the terms of the accepted offer, and the recipients have a 15-day window to review it and object. 

#14: Heirs may file objections

If there are any objections filed with the court, a hearing is scheduled. In a worst-case scenario, this may be the first of months-turning-into-years of hearings. 

In most cases, there are no objections raised, and the sale can proceed. 

#15: The sale is completed at closing

Once the buyer is identified at the hearing, escrow begins. Escrow during a probate sale generally takes 30 to 45 days. If no objections are filed by heirs, the closing will take place. 

After the appropriate document signatures, funds are transferred to the estate and the buyer leaves with the keys and title to their new property.

#16: Distribution to heirs

When the home is sold, funds first go to paying any mortgages, liens against the property, and court costs. 

After the probate process ends, beneficiaries receive their share of the sale.

Berkshire Hathaway HomeServices California Properties: We’re here to help

If you’re overwhelmed by the road ahead as an executor or if you’ve found your dream home under probate, your most important ally is a knowledgeable, skilled probate REALTOR®

Built under leader Nancy Sanborn, who has more than 30 years of experience navigating probate transactions in California, the Probate Real Estate Division of Berkshire Hathaway HomeServices California Properties is ready to help you navigate your probate house sale successfully. 

Contact us today and we’ll connect you with an agent who knows the questions to ask and the regulations to follow for your situation.

Sources: U.S. News

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