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  • Writer's pictureKevin Peterson

Buying A Probate Home For Sale: A Comprehensive Guide

Updated: Sep 15, 2023

As a home buyer, you may be wondering how you buy a house that is a “probate sale.” Probate sales are a unique subset of real estate transactions that involve court supervision to ensure fairness and compliance with the deceased person's wishes or applicable laws. While they can present opportunities for buyers, they also come with complexities that require careful navigation and professional guidance.


This blog posts aims to demystify probate sales, shedding light on the process, its implications, and what it means for prospective buyers and investors.



What is Probate?

Probate is a court-supervised process that serves several critical purposes:

  • Validating the will of the deceased (referred to as the decedent)

  • Taking inventory of the decedent's assets

  • Settling outstanding debts, and

  • Distributing the assets among the legal heirs according to the will's provisions.


In the context of real estate, probate ensures a seamless transfer of property ownership with a clean title.



Is Probate the Same as a Trust Sale?

No. In a trust sale, the buyer won’t have to take any special action. The instructions for the sale of the home are left in the trust by the deceased homeowner. This allows the estate to act without the court system becoming involved. Usually, this results in significant savings of both time and money.


One trustee often makes the decisions on behalf of the real estate, and they possess full authority to make critical decisions about how to sell the home. In some cases, there may be multiple trustees, such as several siblings in the same family.


The process may be more challenging if there are several trustees, but the buyer may never become aware that any disagreements or discussions are taking place.



Key Player in Probate Sales? The Estate Rep.

The person responsible for overseeing the probate process is known as the estate representative (ER).


This person can either be:

  1. An executor (if the decedent had a will)

  2. An administrator (if no will exists).


In most cases, the ER is granted authority through the Independent Administration of Estates Act (IAEA) and doesn’t need a court confirmation. This means the sale of the home proceeds like a standard real estate transaction.


When are estate representatives not granted this authority? When one of the three following scenarios occur:

  1. The will explicitly forbids it,

  2. There's a contested appointment, or

  3. The representative's credit or criminal history prevents them from obtaining a bond for their actions.



Process of Buying Real Estate in Probate:



In cases where court confirmation is required (i.e. there isn't a Will and the ER does not have full authority to act under the IAEA), these two requirements must be met.

  1. The Purchase Agreement must equal at least 90% of the probate court referee's appraised value of the property, with the appraisal being no more than a year old.

  2. Typically require an earnest money deposit (EMD) of 10% of the purchase price into the escrow account upfront, as opposed to the usual 3% deposit in standard transactions.


Subsequently, the sale is advertised in local newspapers with the Notice of Sale, and a public confirmation hearing is scheduled thirty days later. By this time it has been six months to two years since the estate has been under court supervision to transfer the assets.


The court requires that a home selling through California probate be confirmed by the court unless the executor or administrator has full authority to act under the Independent Administration of Estates Act (“IAEA”). A representative must petition the court for home sales in California if the court requires confirmation.


Confirmation Hearing:

At the confirmation hearing, typically ten to fifteen minutes total, the judge takes center stage to announce the purchase price. But here's where it gets interesting: the floor is open for any member of the public to swoop in with an overbid for the property.


To qualify as a contender, this initial overbid must outshine the accepted offer by meeting specific criteria. Typically, the offer needs to:

  1. Exceed the accepted offer by a specific percentage (usually 5% plus $500).

  2. Must be unconditional, meaning all inspections must be completed beforehand and the home is purchased as is, which means prior owners can’t be held accountable for unknown issues.

  3. The purchaser must be pre-approved for the loan and provide a cashier's check for a deposit equal to 10% of the final purchase price.

It's like a real estate showdown, where only the most confident and prepared players take the stage! 🎤🏡



Is Court Confirmation Required?

  • The court requires that a property sale is confirmed by the court unless the representative has full authority under the IAEA.

  • If the estates representative does not have full authority, then they petition the court to confirm the sale within 30 days of accepting an offer from the home buyers.

  • The offer from the original buyers may be subject to overbidding at the court hearing.

  • The court will confirm the sale of the original buyers or to another buyer with a minimum overbid.

  • Title passes to the home buyers after all terms of the sale have been met, the court has confirmed the sale, and the executor or administrator executes the conveyance to the buyer.


How To Find Probate Property In California?

If you find the advantages of buying probate property in California appealing (and aren’t scared off by the potential drawbacks), then the first step would be to learn how you can find and locate probate properties.


Here is a helpful list:

  • MLS Aggregators - Search for probate real estate listings online, such as through real estate agency websites and listing sites such as Zillow.com.

  • Real Estate Agent - Contact your real estate agent to find out if they work with any probate listings, and if not, if they have any referrals.

  • Local papers - Peruse newspapers, including real estate and law newspapers to find probate real estate announcements.

  • Auctions - Both private and public. Search through auctioneer and auction house websites to search for probate sale events.

  • California Trust department - Visit this website to find out about probate listings and sales. The trust department may act as the personal representative and sell the probate real estate.


Pros and Cons of Probate Sales:

While probate sales may not be suitable for every buyer, they offer unique opportunities, particularly for investors and contractors willing to perform due diligence in advance. If an overbid is successful, the original purchaser receives a refund of their deposit, ensuring minimal risk.


However, if the overbidder fails to complete the transaction, they forfeit their deposit. As such, overbidding is relatively rare, providing an opportunity for buyers to secure property at a discounted price with less competition.


For the sellers estate, here is a summary graphic to explain why many prefer to put their homes into a trust and avoid probate.


Conclusion:

In most instances, buying a house through probate can be a relatively swift and straightforward process, resembling a standard real estate transaction. Estate representatives are often motivated to sell quickly, making it possible for savvy buyers to acquire estate properties at favorable prices.


The process of bidding on probate property is different from submitting offers on a traditional home sale. When navigating the intricacies of probate sales, enlisting the guidance of an experienced real estate agent is invaluable. They can support you by helping you understand the process, how to place a proper bid, negotiations, and familiarizing yourself with the necessary laws and rights.


It's essential to also keep in mind that this article offers general information and should not replace legal advice. For personalized guidance, consult with an attorney who can tailor their advice to your specific circumstances.


Did this help answer any questions you may have had? If you have more, please leave a comment or reach out to me directly at (650)451-8763.


Resources:

*The probate process varies across California counties. Here are links to both the California Superior Courts and the Bay Area Superior Courts of California.

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