How to Sell a House in Probate in Sacramento California
How to sell a probate property in Sacramento California is a 4 step process. First get the legal authority to sell the house. This is done by a probate court. Next the probate court will give the personal representative in California two types of power to sell a probate property. One is full authority. The second power is limited authority. It is up to the personal representative to understand the authority they were given and act accordingly.
The third step is to find a real estate agent will find the new buyer that will work within the probate guidelines. This could be a cash “as is” investor or the standard home selling system with a contract with a listing real estate broker. The fourth step is to legally transfer the property ownership and have the funds dispersed to all the proper entities. The mortgage should be paid and the surplus funds moved into the estate account to be distributed according to the terms in the will or probate court decrees.
The situational awareness of selling a probate property
First, my condolences on your lose. Sympathy should be part of any probate inheritance but many times the process of the sale process and transfer of ownership are cold contracts and negotiations procedures. People are part of the process. Don’t feel embarrassed about the emotions that pop up during the course of the sale. I wrote an article about What to do with inherited property?
I work hard to be professional and caring at the same time. The buyer’s want a good deal. If the property has issues they have to be worked out by negotiations. It can be a big help not to take it personally. To everyone else in the transaction it is just a house. In my experience with buying inherited properties clear communication with everyone part of the deal is the key to a win-win deal.
When a deceased person owns real estate, also called real property, it must be sold at the best possible price to maximize the value of the estate. The work of due diligence, correct paperwork, financial issues, and legal matters are cold daily activities for the other people involved in the transaction. Inheriting a home with a reverse mortgage can be a complicated learn more here.
Sensitivity of other people is not required to sell a probate property. And sad to say, it is not always part of every deal I work on. I will work hard to make the process as considerate as possible for you. A inherited hoarding house can be even more stressful.
A quick note about searching for probate issues on the internet: Probate is a legal issue that is generally formed in the state and locally interpreted. I found a lot of web sites from the UK ranked high in search results about the UK probate system. That is not good information about probate in California.
Dan parisi – licensed broker, Certified Probate Real Estate Specialist
The probate process in California
When inheriting an estate with a Will or no Will and there is property to transfer, the probate process also provides for the distribution of the estate’s property to the decedent’s heirs. Probate is when the court supervises the processes that transfers legal title of property from the estate of the person who has died (the “decedent”) to his or her beneficiaries.
A probate sale is a viable way to get rid of property owned by the deceased person and to add the proceeds to the estate for distribution. Here is help with FAQ on the probate process from Superior Court of California, County of Santa Clara to help save time and money. Also a quick fact when a living trust holds title to some of the decedent’s property, that property also passes to the beneficiaries without probate.
A probate sale can mean long drawn out proceedings, particularly with larger estates your real estate agent should help by knowing the California probate law. Knowing the probate timeline can be very helpful. It can be costly to go through the probate sale process. So avoid making the mistake of not understanding the legal obligations. This could further complicate the probated assets.
The assets of the deceased are analyzed and the rightful inheritors of the estate are determined. The personal representative may need to liquidate the real estate. This can be directed by the probate court or the decision of the beneficiaries.
In California who represents the estate?
The court needs to appoint a Personal Representative to the estate. The Personal Representative will be an executor named in the will or an administrator, if there is no will.
Specific features of probate real estate law are common among all jurisdictions in California. For a successful and valid real estate sale, you’ll want to ensure that you thoroughly followed all of the legalities for selling your probate property in Sacramento. Superior Court of California, County of Sacramento
First step is to get the legal authority to sell the house
The Petition for Probate is the first step in the legal process to have the right to sell the property. The person seeking to become the personal representative is referred to as the petitioner. When the petitioner is appointed by the court, they then become the personal representative of the Estate. As provided in the Independent Administration of Estates Act (IAEA), the Executor establishes a list price for the real property.
The most important request to the probate court as it relates to real estate is full authority or limited authority. The initial probate petition will ask the judge to grant the petitioner full authority or limited authority.
In selection 2 Petitioner part c is the request for full or limited authority.
For some reason on the internet there are a lot of articles saying get an “independent certified appraiser” first thing to do. This is not only a wrong action to take first but it is the wrong type of appraiser. In California probate law, if you have full or limited authority will determine even if the court will require an appraiser.
As a quick note, the real estate appraiser in California is called and must have the correct qualification to be a probate referee to appraise the value. Another note if the property is not sold, the estate may need a real estate appraisal for IRS purposes. More info on California probate referees
Step two is to receive from the court and understand full or limited authority
It would be best when selling real estate in the estate to get full authority. The probate court will decide what is best for the estate. I am not telling the court what to do. But it is much easier for the estate to sell a house with full authority. Basically full authority gives the personal representative or executor right to sell the property without supervision. But know the court will look at the sale of the real estate and if they have an issue with the price, terms or whatever they have the power to take action even with full authority granted.
Order for Probate
The probate court will take two actions. The first is to issue the “Order for Probate”. The next actions is to issue letters. These actions will allow the personal representative to legally take action to sell any real estate assets in the decedent estate.
Letters
Get your own copy of the DE-150
- Letters of Testamentary are issued when the decedent had a will
- Letters of Administration are issued if the decedent did not have a will
Here is the legal information on full authority. This link will take you to the law. The California Independent Administration of Estates Act (IAEA) is a piece of legislation under the California Probate Code. The IAEA grants a personal representative or executor the authority to administer most matters regarding the estate without court supervision.
Probate court limited authority and selling real estate sale
The probate court when granting limited authority to the personal representative or executor will oversee the property selling process. One big issue the sale price of the property must be within 90% of what the probate referee values the house. If it comes in lower, a detailed reason must be given. But it is up to the court to accept the offered price.
Inventory & Appraisal
Another issue within limited authority cases is to deal with the two separate valuations given to the court by the probate referee. The first valuation was given under a “Final Inventory & Appraisal”, which provides the property value as of the date of death. The second value provided to the court is a “Reappraisal for Sale Inventory & Appraisal” which provides the court the current value of the property for the purpose of the sale.
The court also requires that a “Notice of Sale of Real Property” be published in a local newspaper (that is right, in this day and age, a real newspaper) in the county where the property is located. One of the things this does is to notify creditors of the sale. a Notice of Proposed Action is mailed to all heirs, simply stating the terms of the proposed sale. A Notice of Proposed Action is mailed to all heirs, simply stating the terms of the proposed sale.
Notice to Creditors
Get your own copy of the DE-157
The probate process is required to give notice of the probate to all known creditors.
Here are more actions and demands of the limited authority on the sale of a property. The buyer must put into escrow an initial deposit for limited authority in most cases around 10%. The buyer of the probated property needs to clear all contingencies, except for the contingency of court confirmation. Once all contingencies are cleared, the probate attorney will prepare and file the “Report of Sale and Petition for Order Confirming Sale of Real Property”
The Report of Sale and Petition for Order Confirming Sale of Real Property form is the petition that discloses these facts to the court:
- Total commission that is to be paid to the real estate agents if any
- The sale price
- The address of the real property
- The values provided by the probate referee
- The deposit amount
- The starting over-bid amount along with the formula for overbids
Report of Sale and Petition for Order Confirming Sale of Real Property
Get your own copy of the DE-260 Report of Sale and Petition for Order Confirming Sale of Real Property
In California there is a complicated pubic biding for properties with limited authority. Once the court confirms the sale price it will set a hearing date. On the date of the hearing, if any over bidders appear in court, the probate attorney will request a 10% deposit from all bidders. When the overbid process is finished and a winner awarded the property proceeds to escrow to close as the probate court requires. The purpose of the home sale is to secure the best possible price for the house.
How long does probate take in California?
In California, the average probate case takes approximately one and a half years to complete. During that year, the personal representative is in control of the cash and assets of the estate. The real estate can be sold before probate is finished. The funds from the sale of the property (if there is any surplus after the real estate fees, cost and debts) are put into the estate capital account like a bank. Some probate properties are sold through a traditional sale process, while others are subject to auction. The Certified Probate Real Estate agent Specialist (CPRES) helps make the probate sale during the expected time frame. The timeline of property sales during probate varies from state to state. I wrote a whole article on the California probate timeline here.
In order to open the account, the bank will request a copy of the Order for Probate, a certified copy of the Letters and the estate’s tax ID.
Is a surety bond mandated in California?
In some cases, a surety bond is issued for the personal representative to secure the estate’s assets. In the event the personal representative takes off with the funds in the estate, the insurance company who bonded the personal representative will pay all interested parties of the estate to make everybody whole. The attorney and judge will address whether bond can be waived. If the court requires a bond, they will determine the bond amount necessary to secure the estate.
Waiver of bond
Get your own copy of the DE-142 Waiver of bond by heir or beneficiary
The third step is to find a real estate buyer that will work within the probate guidelines
Full authority probate real estate sale procedures
With full authority once the Order for Probate and the Letters are issued, the personal representative has the power to sign an exclusive listing with the listing agent or broker for a period of no more than 90 days. Realtors have to use CAR forms for a probate listing and purchase agreements and disclosures.
Also an offer can be accepted any time once the Order and the Letters are issued, when the probate case is full authority under IAEA. At that time the personal representative can accept a cash offer and close within 20 day if they like. However, you cannot close escrow until the 15 day period elapses.
A personal representative with full authority is not bound to the sell the house for at least 90% of its appraised market value as there is absolutely no court confirmation required. It is not necessary to wait for the probate referee to complete the appraisal of the property, which can take up to another 60 days.
Once the confirmation of the personal representative has full authority, they can inform potential buyers that no court confirmation will be required. All heirs must be in agreement to the selling price. The probate transaction is not going to a judge for approval. All escrow needs in order to close your transaction are: 1) the Order for Probate, 2) the Letters, and 3) the Notice of Proposed Action.
Limited authority probate real estate sale procedures
The personal representative with limited authority needs the Order for Probate and the Letters to proceed to sell the property. But the personal representative with limited authority has court oversight and rules to follow to sell the property.
The sale price of the property must be within 90% of what the probate referee values the house. It cannot be lower. The probate referee is randomly appointed by the court.
Property selling price and value of the property under limited authority
In limited authority cases, there are two separate valuations given to the court by the probate referee. The first valuation is given under a “Final Inventory & Appraisal”, which provides the property value as of the date of death. The market value of the home is set in “as is” condition. The second value provided to the court is a “Reappraisal for Sale Inventory & Appraisal” which provides the court the current value of the property for the purpose of the sale.
- The court needs this information to be current before you appear in court for the confirmation of sale as stated in probate code 10309.
- The court also requires that a “Notice of Sale of Real Property” be published in a local newspaper in the county where the property is located.
- The initial deposit for limited authority cases is 10%.
- The buyer needs to clear all contingencies, except for the contingency of court confirmation.
- Once ALL contingencies are cleared, the probate attorney will prepare and file the “Report of Sale and Petition for Order Confirming Sale of Real Property”
- State law determines the bidding policies including the overbid process could be done in the court at that time. When one or more buys want to place a bid the court process works to establish the selling price of the property sale.
- The California overbid formula is the Original Bid for the property Plus 10% of first $10,000 of original bid: $ 1,000 Plus 5% of (original bid minus $10,000 equals the Minimum overbid).
- If the sale is confirmed, the judge will sign an “Order Confirming Sale of Real Property” awarding the real property to the highest bidder.
- Escrow will need a certified copy of this order to close escrow and transfer the real property to the new owner.
What is California overbidding process in probate?
In California, probate overbidding refers to the process of bidding on a property that is currently in probate, which is the legal process of settling a deceased person’s estate. During probate, the court will oversee the distribution of assets to the heirs or beneficiaries as outlined in the deceased person’s will or according to state laws of inheritance.
Probate overbidding occurs when multiple parties are interested in buying a property that is part of the probate estate. The property is sold at a public auction, and the highest bidder wins the property. The process can be quite competitive, with bidders often offering well above the asking price in order to secure the property.
How does the probate overbidding process work?
The court also requires that a “Notice of Sale of Real Property” be published in a local newspaper in the county where the property is located. The purpose of this publication is to notify potential buyers that the property will be open to auction in court.
Once the newspaper publication is completed, you can execute the Probate Purchase Agreement.
The initial deposit for limited authority cases is 10%. Once paid, the court will set a hearing date. On the date of the hearing, if any over bidders appear in court, the probate attorney will request a 10% deposit from all bidders. The money is to be paid only with a cashier’s check.
The California overbid formula is the Original Bid for the property Plus 10% of first $10,000 of original bid: $ 1,000 Plus 5% of (original bid minus $10,000 equals the Minimum overbid).
Let’s look at a scenario under which the sale price is $526,000. Based on the overbid formula, the first bid in court, if any, must start at $552,800.
That calculation is reached as follows:
Original Bid: $ 526,000
10% of first $10,000 of original bid: $ 1,000
5% of (original bid minus $10,000): $ 25,800
Minimum overbid (a + b + c): $ 552,800
How to close and own a probate home when done with the overbid process?
The buyer needs to clear all contingencies, except for the contingency of court confirmation. Once ALL contingencies are cleared, the probate attorney will prepare and file the “Report of Sale and Petition for Order Confirming Sale of Real Property”. This petition discloses the total commission that is to be paid to the REALTORS, the sale price, the address of the real property, the values provided by the probate referee, the deposit amount and the starting over-bid amount along with the formula for overbids.
Once a sale is confirmed, the judge will sign an “Order Confirming Sale of Real Property” awarding the real property to the highest bidder. Escrow will need a certified copy of this order to close escrow.
It is advisable that one must consult a probate attorney before participating in the overbid process to understand the terms and conditions of the bidding process, the rights and responsibilities of the buyer and seller and the court’s rules and regulations.
Know the sale price of the property and total cost to sell
Make sure you can close on the contract for your probate property in Sacramento. Be certain that the costs of the property are covered by the escrow funds. If the debt on the property and the cost to close the transaction is not funded by the price there will be funds needed to close escrow. Make sure the estate has the funds to close.
The fourth step is to legally transfer the property ownership
Once the personal representative and your buyer sign the probate purchase agreement, the probate attorney will be able to draft the Notice of Proposed Action (NOPA). The estate representative, through their probate attorney, will then submit to the court to confirm the sale.
Keep in mind that the attorney needs a copy of the probate purchase agreement in order to prepare the NOPA. The Notice of Proposed Action contains information pertaining to the sale including the sale price, the buyer’s name and a copy of the probate purchase agreement.
The court requires the Notice of Proposed Action to be filed in the case and mailed to all beneficiaries. If any of the heirs wish to object to the sale price, they have 15 days to do so. If no objections are filed within 15 days as provided by the NOPA, the transaction can proceed to close escrow. However, you cannot close escrow until the 15 day period elapses. The judge will sign an “Order Confirming Sale of Real Property” awarding the real property to the highest bidder. Escrow will need a certified copy of this order to close escrow.
Escrow must be given the estate’s Tax ID number. The estate’s Tax ID should have been done when the probate process was started. When escrow prepares the 1099 for the sale of the property, they must use the estate’s tax ID to report the proceeds, not the decedent’s social security number.
When escrow closes, the real estate brokers get their commissions, if there are any agents used in the real estate transaction. A cash investment buyer should not charge a commission. A cash buyer that made an “as is” offer should not have any repair payment coming out of the escrow funds. At the close of escrow the buyer obtains possession of the property.
The heirs do not have access to the funds at the close of escrow. The proceeds of the sale must be deposited into the estate’s bank account until probate concludes.
Sell to buyers who have the funds to close
As you can see this process is long and difficult sell a house in probate. It is very important to make sure the buyer has the funds to close the deal with their original offer. The problem with many home buyers is that they need a mortgage to pay for the property. If their loan is not approved, it creates many issues for the estate and court. Also what to do if there are issue with dividing the estate. More paperwork equals more cost. Find the right buyer with the resources to close the property sale.
We’re here to assist you during this difficult time and make the process easy. Call or text Coffee Real Estate today at (916) 481 8106 even if you just have a question. We are good at finding real estate investors with the cash to buy in “as is” condition. Also we can market your property for top dollar home buyers. We can help validate their ability to pay upfront. Let us know how we can help.
This website is designed for information only and is not intended to offer legal advice.
