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Matt McGilvray
Probate Real Estate Sale Process
The first Selling real estate through probate or trust involves a series of court-regulated steps that must be closely monitored and managed. Adhering to strict deadlines is crucial, as is ensuring that all documentation meets specialized requirements. The court’s oversight must be respected throughout the marketing, offer, negotiation, and sale processes.
Matt McGilvray
The Probate Real Estate Sale Process.
The sale typically involves several key individuals: the court personnel, the Executor or Administrator of the estate, the attorney representing the estate, a real estate agent acting on behalf of the seller (the estate), potential buyers who submit bids to the court, and their real estate agents. Each participant must adhere to the court’s guidelines and deadlines.
Due to the court’s involvement, probate and trust sales come with their own unique vocabulary (see glossary). They also require various disclosure documents and contracts that differ from standard real estate transactions. It’s vital that your real estate agent is experienced in probate and trust sales to navigate the terminology, documentation, and steps in the process. Clear communication is essential.
To provide a better understanding of the probate and trust sale process, here are the typical steps involved in such a transaction:
- Appointment of the Executor or Administrator: Typically, the decedent’s will names an Executor responsible for distributing assets, including real property. If no Executor is designated, if the named Executor cannot serve, or if there is no will, the court appoints an Administrator to fulfill these duties. This individual holds the authority to list and sell the property, which cannot proceed until identified.
As outlined in the Independent Administration of Estates Act (IAEA), the Executor determines a list price for the real property, considering the appraisal from the Probate Referee. This price is usually set with the guidance of a real estate agent experienced in probate and trust sales. The property is then listed for sale through that agent or broker, who will employ various marketing strategies to attract the highest offers. These strategies include signage, newspaper advertisements, online listings on real estate websites, and open houses for agents and potential buyers. The agent will also arrange showings for interested parties.
Although buyers may seek bargains in probate and trust real estate, their offers must comply with court regulations. An accepted offer must be at least 90% of the Probate Referee’s appraised value. Once a buyer is identified, the real estate agent will assist in negotiating terms that satisfy both parties. After securing an accepted offer, a Notice of Proposed Action is sent to all heirs, outlining the terms of the proposed sale. Heirs have 15 days to review the notice and voice any objections. If there are no objections, the sale can proceed without a court hearing.
If the Executor or Administrator lacks full independent powers under the IAEA or if any heirs object to the Notice of Proposed Action, a notice of the sale must be published in a widely distributed local newspaper (unless the will states otherwise). The estate’s attorney then applies for a court date (the “confirmation hearing”) for the sale, typically occurring 30 to 45 days after the application is filed. Interested parties receive a copy of the application and details about the sale.
When an offer is accepted, a Notice of Proposed Action is distributed to all heirs, indicating the terms of the sale. They have 15 days to review and raise objections. If there are no objections, the sale can proceed without a court hearing. However, if the Executor or Administrator lacks full independent powers, or if an heir objects, notice must be published in a local newspaper.
The attorney will then apply for a confirmation hearing, with the court date usually set within 30 to 45 days after the application. Even after the court date is established, the real estate broker should continue showing and marketing the property to attract “overbidders” to potentially increase the sale price.
During the confirmation hearing, other interested parties can overbid the accepted offer. The party wishing to overbid must attend the hearing with a cashier’s check (personal checks are not accepted) totaling at least 10% of the minimum overbid price. The minimum overbid is calculated using the following formula: 10% of the first $10,000 of the accepted offer plus 5% of any remaining amount.
Example Calculation: If a property is listed at $200,000 and the accepted offer is $175,000, the minimum overbid is calculated as follows:
- Accepted Offer = $175,000
- 10% of the first $10,000 = $1,000
- 5% of the remaining $165,000 = $8,250
- Minimum Overbid = $175,000 + $1,000 + $8,250 = $184,250
- Therefore, the amount for the cashier’s check would be $18,425.
If multiple parties place overbids, the highest bid wins. The successful bidder submits a cashier’s check to the Executor or Administrator, and escrow is opened. Escrow typically closes approximately 30 to 45 days after the court hearing. For more guidance, refer to The Sanborn Team’s handy chart on managing the probate process or check out frequently asked questions for sellers of probate properties.
If you need assistance selling real property through probate, trust, or conservatorship, call The Sanborn Team at 310-777-2858 today.