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California Probate Real Estate Sales

This is an updated version of an article I wrote for the Sacramento Realtor, real estate magazine, a few years ago. I updated it for posting here today. Though it’s written for the real estate professional I think the key ingredients should make sense to anybody dealing with a real property sale in a California probate.  Let me know of any questions you have.  -John

As a probate and trust administration attorney I am often asked how soon after a loved one’s death can a house be sold.  Of course, this is a loaded question as I do not have an answer until I know if the person who died (the “decedent”) had a living trust or not.   Quite often the decedent did not have a living trust.  This means the “P” word… PROBATE!   To many the P word is evil and conjures up images of an over-reaching government taking family assets.  In fact, it’s typically not that at all.  Rather, probate is the court administered process of gathering and distributing a deceased persons estate to those entitled to receive the decedent’s assets after first determining what taxes and liabilities need to be paid. While it does take a minimum of 7 months to complete a probate, business can be conducted during those 7 months.    I should add there are exceptions to a full probate for property worth less than $100,000 and that limit is going up to $150,000 January 1, 2012 due to Assembly Bill 1305.  This article focuses on full probate though.

Officially a house can not be sold, or even listed for sale, until a person has been named Personal Representative by the probate Judge.  It should be noted that filing a probate does not stop a foreclosure sale.  Absent a Special Administrator being appointed, officially no action can be taken for at least 6 weeks after death (that is, until that first Court date).  Thus, the most important thing is that the family try to come to an agreement on who should serve as Personal Representative and a petition should be filed with the Court as soon as possible.  The longer the family waits to file their probate petition means that much longer until they can sell the house.  In today’s real estate market time is generally not on the side of a seller who delays in getting their house onto the market!  Generally my advice to my clients to is sell fast and avoid the falling market.

Once a person is named PR they can sign a listing agreement with the Realtor of their choice as long as the PR has petitioned, and been approved, for administration with full authority under the Independent Administration of Estates Act (IAEA).   Having full IAEA authority is very important as it allows an administrator to sign a listing agreement and complete the sale of a house without Court approval in most cases.  Let me re-type those words in BOLD, SIGN A LISTING AGREEMENT AND COMPLETE THE SALE OF A HOUSE WITHOUT COURT APPROVAL.  That’s right, Court approval is often not required to sell a house in probate!

In these types of cases, selling the house will be very similar to a standard real estate transaction.  One difference is that do I advise that you use the probate sales form (CAR form #PPA).  Also, your client does not have to fill out all the disclosures that they normally would since it’s presumed they do not know anything about the house because they often never lived in the house.  Additionally, the Realtor’s commission should be exactly the same as in a non-probate sale; typically 6% in my experience.  Instead of a specific Court order, the title company will require that a Notice of Proposed Action that includes certain terms of the sale has been sent to all interested parties.  This should be mailed at least 15 days before the planned close of escrow and specifies that the interested parties have 15 days to object to the proposed sale.  The probate attorney will take care of this but you need to notify them once the property is in contract so that they know to send out the notice and get the necessary documentation to the title company so that the sale can close in a timely fashion.

Ok, what if your client does not have full IAEA authority, then what?  You have heard of a situation where the probate Judge auctions off real estate and guess what; this really does happen!  The situations that would cause the Court auction to happen are as follows.  If an interested party objects to the Notice of Proposed Action then the sale reverts to a Court auction.  Also, if the PR does not have full IAEA authority then a Court auction is usually required. A Court auction will generally be held about 6 weeks after filing the petition to confirm the sale with the Court.  This petition should be filed as soon as possible after entering into a sales contract.  Among other things it requires a showing of the marketing efforts made in selling the house so keep accurate records!  Also, when the Court auction situation arises a house does need to be sold for at least 90% of the probate referee’s appraised value as of the date of death. This can be difficult!  If it has been one year since death then the house should be re-appraised by the probate referee, at time of sale, and thus the 90% rule would be easier to comply with.  The bottom line, however, is that I try to avoid probate Court auctions whenever possible.

There are many other issues that arise in a probate.  I will address some of them in a later article. However, should you have any questions related to a California probate please call me to discuss them.

In conclusion, a house may be sold during a probate.  Though there are specific rules to follow and they are often not that cumbersome.  In a down real estate market it is very important to get a person appointed as the personal representative of the estate as soon as possible so that they can enter into a listing agreement and ultimately a sales agreement.  Make sure that your client has a competent probate attorney to guide them through the process to avoid delays!  It is my advice that your client should hire someone who has been deemed a Certified Expert in Probate, Trust and Estate Planning Law by the State Bar of California Board of Legal Specialization as we tend to have a deeper knowledge of all the ins and outs of a California probate real estate sale.

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10.0John Bernard Palley
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