When the sale of real property is necessary in a probate proceeding, the court usually allows the estate personal representative to hire real estate professionals to sell the real property.
When the sale of real property is necessary in a probate proceeding, the court usually allows the estate personal representative to hire real estate professionals to sell the real property. The process of selling real property in probate is similar to the sale of any other real property, provided that the individuals involve must strictly follow the guidelines and deadlines under the probate law. Court confirmation is required in almost all probate sale proceedings where the purpose is to ensure that the best possible value is obtained in liquidating the decedents assets.
Listing and Marketing
The estate personal representative is usually the executor, who is named in the will, or the administrator, who is appointed by the probate court when the decedent passed away intestate or when the executor is unwilling to serve. The personal representative has the authority to list and sell the real property as he or she were the seller in a real estate transaction. The personal representative will then enter into an exclusive listing agreement with a real estate agent with the permission of the court. Once that authorization is granted, the real estate agent can freely market the property. California Association of Realtors (“CAR”) has several forms, including probate listing agreement, purchase agreements and addendums, which are available for the agents to utilize.
Accepting Offers and Notice of Sale
The sales price of the estate’s real property subject to court confirmation must be at least 90 % of its appraised value set within one year prior to the sale (Cal. Prob. Code § 10309). All terms of a sale, including the minimum required deposit and broker’s commission, are generally subject to court approval and local rules of court which vary from county to county. Sometimes, the personal representative or local court rules will require the offers be accompanied by a deposit of 10% of the purchase price. When an offer is accepted, a Notice of Action is mailed to the heirs stating the terms of the proposed contract. If the heirs do not object after 15 days of the notice, then the sale may proceed without a court hearing.
If an objection is raised to the Notice of Action, or if the personal representative does not have full authority under the Independent Administration of Estate Act (Cal. Prob. Code § 10503), a Notice of Sale must be published prior to the sale of the property. The Notice of Sale provides the public with required information concerning the sale and must be published in local newspaper at least three times over a period of not less than 10 days before the sale, with the third publication at least five days after the first publication (Cal. Prob. Code § 10300; Cal. Gov’t Code § 6063a).
Court Confirmation of Sale
Unless the personal representative has full authority under the Independent Administration of Estate Act, the sale needs to be confirmed by the probate court within 30 days of accepting an offer. During the wait for the confirmation hearing, the real estate agent may continue to market and advertise the property and may accept offers from an “over-bidder,” one who offers a higher price for the real property. The court will confirm the sale to either the original bidder or to an over-bidder at the hearing, where the property is sold auction style with the opening bid being the accepted offer price plus a 5% percent and $500 increase. The successful bidder is then required to immediately deliver a cashier check of the deposit to the personal representative. The court will also grant the broker its commission at the confirmation hearing and the escrow of the transaction generally will close after 30 to 45 days after the hearing.
For more information regarding Probate Sale, please refer to CAR Legal Q&A.