WHAT IS A TRUST?
A situation in which one person (or entity) holds the legal title to a property for the benefit of another.
WHAT IS A PROBATE?
Probate is the court-supervised administration of a decedent’s estate. The probate proceeding involves “proving the will” (if there is a will), appointing the personal representative, determining the decedent’s assets that are subject to probate, paying outstanding debts, and disbursing funds to the beneficiaries. In some cases, the decedent’s estate includes real property that must be sold under the court’s supervision.
WHY DO SOME PROBATE PROPERTIES NOT REQUIRE COURT CONFIRMATION?
If a probate property is a Trust Sale or if the Executor/Administrator of the estate has been granted “full independent powers” under the Independent Administration of Estates Act (IAEA), the sale may not require court confirmation.
If the Administrator has full independent powers, he or she may elect to list the property for sale. Once an offer is accepted, the estate’s attorney mails out a Notice of Proposed Action stating the terms of the proposed sale to all the heirs. The heirs then have 15 days to object to the sale. If there is no objection within 15 days, the sale goes through without any court hearing required. (Regardless of the details of the probate transaction, sellers are strongly encouraged to work with a professional probate attorney to protect the estate’s best interests.)
WHAT IS A PROPERTY PROFILE?
A Property Profile is a report that provides details on a specific property. It contains information such as square footage, number of bedrooms and bathrooms, lot size, zoning information, use code, tax information, and ownership information. Additionally, the profile has the recorded documents, such as the grant deed, quitclaim deed, and copies of deeds of trust. The report can also contain sales comparables, school information, and neighborhood information. A complete, current property profile is essential for setting the price of the real property and for determining problems that may interfere with the sale.
SHOULD I MAKE REPAIRS BEFORE LISTING A PROBATE PROPERTY FOR SALE?
No. In California, probate properties are sold “as-is.” If you make repairs you may inadvertently conceal something about the condition of the property. Even a coat of paint can unintentionally conceal a defect. Except for removing personal possessions, clearing out trash and cleaning up the entryway and yard, it is important to leave the property in its present state and let the buyers do their inspections and satisfy themselves as to the condition of the property.
WHAT DO I NEED TO DO TO PREPARE THE PROPERTY FOR SALE?
Your agent should be able to recommend a number of qualified specialists to help you prepare the property for sale, including removing belongings and obtaining professional cleaning. Your agent should also assist you in conducting an inventory of the real property for sale and in preparing a comprehensive property profile.
HOW CAN I CHOOSE THE BEST LIST PRICE?
Your agent should provide you with detailed market data, called a Market Value Analysis. This includes the selling prices of similar properties in the neighboring area. It will also include in-depth information on recent sales in the area, such as price per square foot and the number of days the property was on the market. Taking into consideration the information in the analysis as well as other intangibles of the market, your agent will be able to help you determine a listing price that is appropriate for the market and will attract the greatest number of qualified buyers.
ONCE A PROPERTY IS LISTED, HOW WILL IT BE MARKETED?
Your agent should pursue a number of strategies to expose your property to likely buyers. They include signage on the property, newspaper and internet advertising, direct mail, open houses for agents, and the public and personal networking among successful agents who may represent qualified buyers. Your agent will conduct showings for interested buyers and their agents will answer questions about the property and will continue to promote the property in order to secure the highest offer. Your agent should also communicate with neighbors in the immediate area, keeping them informed about the price and other details about the property. Ask your real estate agent for a written marketing plan and for explanations of how various types of marketing will benefit the sale.
DO I HAVE TO PAY UP FRONT FOR ALL THIS MARKETING AND ADVERTISING COSTS?
No, there should be no advertising or marketing up-front fees.
IS THE PAPERWORK DIFFERENT IN A PROBATE SALE THAN A TRADITIONAL REAL ESTATE TRANSACTION?
Yes. In most real estate transactions, the seller is required to disclose information about the property, including defects, construction conducted without a permit, evidence of pest or water damage, etc. Because of sellers of real property through probate, trust or conservatorship may never have lived in the property that’s being sold, special disclosure forms take this into account. Probate and trust sales require special disclosures, listing agreements, and purchase contracts. In California, the California Association of Realtors has standardized forms specifically for probate transactions.
HOW DO YOU DETERMINE THE MINIMUM BID IN COURT AT THE COURT CONFIRMATION HEARING?
The minimum first overbid price is set by a statute in the Probate Code. Calculating the overbid assumes that there is an accepted offer on the property. The minimum overbid amount is 10% of the first $10,000 plus 5% of the balance of the accepted offer. The overbid must be presented in person by cashier’s check (no personal checks). If a property is highly desirable, there may be more than one overbidder. In that case, an overbid above the minimum would be to the advantage of the potential buyer. Here’s an example of how the overbid and deposit amount are determined:
EXAMPLE: A property is listed at $200,000. The accepted offer is $175,000.
The minimum overbid is calculated as follows:
Accepted offer = $175,000
+.10 x $10,000 = $1,000
+ .05 x $165,000 = $8,250
Minimum overbid = $184,250
x .10 = $18,425 amount of cashier’s check
SHOULD I USE THE SAME AGENT WHO HELPED ME SELL MY OWN HOUSE?
You are free to choose any real estate agent you like, but it is important to remember that probate real estate sales are complicated legal matters. Most real estate agents are not experienced or well-versed in the probate process. It makes sense to choose an agent who specializes in probate and trust real estate, and who understands the intricacies of pricing, marketing, and presenting such properties. Your agent will represent your interests throughout the transaction; being able to understand and explain the process is essential.
Have more questions? We’re always available to answer them. We are sensitive to the need for confidentiality, clear thinking, timely explanations, aggressive marketing, astute negotiations, and, in many cases, quick sales.
For a better understanding of probate terminology, view the probate glossary.
For a full marketing proposal for your probate and trust real estate, please contact LA City Probate today at 310.482.2035.