Simple Guide to California Probate Sales

Simple Guide to California Probate Sales

There’s something called a probate sale in real estate. This kind of real estate transaction happens when someone passes on without a will, leaving their home sale under the direction of state laws. Sometimes, there is a will, but it explicitly asks for the property to be sold. There are other causes too, which we’ll discuss more.

The probate sale is meant to handle the estate correctly to pay beneficiaries and heirs. When the sale is completed, any taxes and debts are paid for by the proceeds.

Probate sales are legal in California, though it’s a strict process that differs from a traditional sale in many ways. For starters, the key decision maker in a probate sale is the court. The home isn’t under the owner’s control, and so, the state laws guide the sale. 

What is a Probate Sale in Real Estate?

California probate sales are state-controlled real estate sales. For whatever reason, the sale of the estate needs to proceed. The most common reason would be someone passing on without leaving any will or instructions. However, probate sales can still happen with a will, if it orders the property to be sold. Another reason is outstanding debt. If a homeowner has sufficient debt, a court may decide that the home sale should go toward paying that debt.

Without the homeowner controlling the sale, the California legal system steps in to make key determinations and rulings. 

Courts usually give the authority to sell the home to someone called an executor or administrator. 

The Duties of an Executor and Administrator in a Probate Sale

While these two titles (executor and administrator) may sound like two names for the same role, they’re actually quite different from each other. 

An executor is named in the will of the homeowner. Their role has been pre-decided by the homeowner in the case of their passing or to settle debts.

The executor’s role in a probate sale:

  • Get the legal authority to proceed with the sale.
  • Arrange a professional appraisal of the home.
  • Market and list the property for sale.
  • Negotiate and handle offers from buyers.
  • Handle the closing of the sale.

An administrator is court-appointed, either because there is no will or the executor isn’t available. The executor has similar duties to an administrator, but not identical. 

Administrator-specific duties:

  • Establish that there is no will available. 
  • Identify any heirs or beneficiaries of the deceased.
  • Seek court approval for major decisions.

Whether an executor or administrator handles the sale, some duties are shared. Both must keep detailed records of the process and note any expenses. They’ll also maintain the home and keep it in good condition until it changes hands to a new owner. Of course, both must also act in good faith. With no direct involvement from the owner, this last duty becomes vital. The executor and administrator must both work toward the best interest of the estate and any beneficiaries. 

How is Real Estate Sold in a Probate Sale?

When they’ve gotten the required approval, executors and administrators can put the property up for sale. Establishing a listing price is crucial and should be done by professionals, which is why local realtors are usually called on. If repairs must be done, these expenses will be recorded by the executor or administrator. 

  A remodeling underway in California

A house undergoing some remodeling - via Bob Dass

The home is listed and marketed, though the listing may not say anything about it being a probate sale. They’ll work with realtors to ensure that the home sale goes smoothly and profitably.

Buyers can view probate homes and make offers, but here’s where things diverge from the standard home sale process.

  • No offer can be under 90% of the appraised value (appraised less than 1 year ago).
  • Courts must be notified once an offer is accepted.

It’s possible to avoid this part by applying for the IAEA (Independent Administration of Estates Act), which gives you more authority over the property and removes some of the court's control. 

Estate Auctions

California probate sales auctions can happen on certain properties. They only start if someone is interested in starting bidding at 105% and $500 over the currently accepted offer. If such a person is present at the hearing (which anyone may attend), then the auction part of the sale can start. 

The highest bid wins, but only if the number is reasonable. For example, if the offer is $650,000, but someone bids $11,000,000. That number is not reasonable compared to the offer price and the judge is unlikely to allow it.

The winner of the probate sale auction must pay a 10% deposit on the property. 

More Important Rules of Probate Sales

On top of what you now know, there are some important points we should share. 

  • The estate's value must be over $166,250 to be eligible for a probate sale.
  • The first things paid after a probate sale are the debts, liabilities, and taxes.
  • It’s possible to avoid probate sales by placing properties in trust. This provides constant stewardship of the property.
  • A Notice of Sale of usually published, unless the representative has full authority of the IAEA, or has been instructed to sell the property via the will.

Want to Ask Us Some Questions?

Oftentimes, it’s easier to get rid of confusion by speaking directly with a professional. Our real estate team in San Jose, Santa Clara, has many of them. Our success rates are higher than average and we’ve been in business for over a decade. We’ll be able to answer all of your probate sale questions and guide you to the next step.

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If you have more questions about what to expect from the markets around the Bay Area, don’t be afraid to reach out to us today. Our experts are experienced in all property types and the entire San Francisco Bay Area, and we can help you to find what you need to know today.

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