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Probate is the term used to describe the process executed at a county court in the USA where the executor for the estate of a deceased person sells property from the estate (typically real estate) in order to divide the property among the beneficiaries.

In California, when real estate of a deceased person goes into probate, the sale of that real estate becomes subject to certain legal requirements and regulations.

In the majority of cases in our area today, the estate representative (an executor or administrator of the estate) has the authority to sell the property through powers granted by the Independent Administration of Estates Act (IAEA). When the estate representative has full powers under this act, he/she may elect to sell the property without the need for a court confirmation hearing. Unless there are objections by interested parties to the estate, which could require the probate sale to be confirmed in a hearing, the sale can usually be completed with a minimum of additional requirements. Most estate sales sold under the IAEA are completed very smoothly and differ very little from most other sales.

In some cases, the estate representative sale of property in probate may be granted only limited powers through IAEA, in which case a confirmation hearing is required. Even if the estate representative has full powers, he/she may elect to have the sale confirmed in court.

When court confirmation is either chosen or required for a real estate probate sale, certain procedures are generally followed, as required by law and/or custom:

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An offer is presented and conditionally “accepted” by the estate representative. This purchase agreement is not binding on the estate.

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After all buyer contingencies are removed from the accepted offer, a petition for the court hearing is made. The date of the court hearing depends upon the court calendar at the time, but it is usually around 21-45 days from the date of the petition.

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The buyer will need to put up a deposit equivalent to 10% of the purchase price prior to or on the date of the court confirmation hearing. This is usually done by cashier's check.

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The sale, together with the accepted offering price, is advertised for a statutory period in a local newspaper.

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There is open, competitive bidding at the court hearing. The minimum first overbid price shall be an amount equal to the accepted purchase price of the accepted offer, plus five percent of that amount, plus $500. In the event of such an overbid, the court shall determine any further incremental overbidding amounts - for example, $1,000 or $2,000. The bidding stops with the final bid.

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Any person who bids in court must make an unconditional offer (i.e., obtaining financing and approving inspections should not be a condition of the offer) and if confirmed must present a deposit in the form of a cashier’s check for 10% of the purchase price as described above, or as otherwise determined by the court.

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In the event a buyer defaults after a court confirmed sale, the buyer may lose his/her deposit. In other words, the buyers' deposit is subject to forfeiture in the event they are unable to close.

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If the court confirms the sale to an overbidder rather than the original buyer, the original buyer’s deposit shall be refunded. If the sale is confirmed to the original buyer, the deposit shall apply to the purchase price.

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The purchase price accepted must be at least 90% of the probate referee’s appraised or re-appraised value of the property.

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Real estate commissions are subject to approval of the court. Generally they are 5% in Los Angeles County.

Things you need to be aware of about Probate Sales:

  • Probate properties are sold “as is” so don’t expect the owner to make repairs or improvements — or to lower the price because of existing problems.
  • Read the disclosures! There are special disclosure documents governing probate sales, so be sure you understand the terms before you make an offer.
  • Be prepared in court. If a probate sale requires court confirmation, the timing and amount of your offer and the form in which you make your deposit are closely regulated.
  • There are usually no contingencies on probate sales. In other words, the seller does not have to wait for you to find a loan or to sell your existing home. Get advance approval from your lender. The terms of a probate sale are cash. You can obtain financing, but it cannot be a contingency of the sale and if you cannot close in the time specified in the confirmation hearing, your 10% deposit is subject to forfeiture unless otherwise specified by the probate court.
  • Work with a probate real estate expert. When you are selecting a real estate agent to assist you with your purchase, ask for details of their recent probate experience in your marketplace. While any agent can represent you, only a probate expert can assure that your transaction is managed correctly so you get the property and the terms you want.
  • The preceding is a general discussion of certain probate sale procedures in California. This information is not intended as legal advice, or guaranteed accurate or complete. Specific situations may differ. Contact your attorney for information regarding any particular situation.

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