PROBATE REAL ESTATE SALES PROCESS
There are many “moving parts” when it comes to selling a piece of property. The property needs to be listed for sale at a competitive price, the property needs to be marketed correctly to attract the right kind of buyer for the home, the buyer needs to lock down a loan (if not paying cash), inspections on the property need to take place…etc!
When selling a property that is in the probate process, things work a little bit differently. There are many court regulated steps that need to take place, and they must be monitored carefully, and deadlines need to be met for things to move along smoothly.
To give you an understanding of this process, here are some of the steps that must take place:
In order for the process to get started an Administrator or Executor of the estate must be appointed. If the decedent left a will, most likely the Executor will be mentioned in that will. The designated Executor is in charge of handling the assets of the estate, including all real property. If there is not a will, or the Executor named in the will does not want to serve, the court will then appoint an Administrator to carry on those duties. Whoever is appointed Administrator (or Executor) has the authority to list and sell the real property.
The Administrator or Executor can now hire a Realtor (preferably with probate knowledge) to help come up with a price, market, and sell the property. The price should take into account the appraisal (drive by) that was done by the probate referee. The accepted offer must be at least 90% of the probate referee’s appraised value. If the accepted offer price is less than 90% of its appraised value, the probate referee may need to re-appraise the home.
The Realtor would then market the property to the public in their best attempt to bring in the highest offer. Marketing a property may differ from agent to agent, but the most commonly used marketing approaches may be by, holding a “Brokers Open” (an open house during the week to bring as many real estate agents to see the property as possible), an “Open House” (on the weekends for the public), posting the property on real estate websites, posting the property on the MLS, taking out an ad in the real estate section of the newspaper, direct mail, and putting a sign on the property to attract any potential buyer driving through the neighborhood.
Once the property has been marketed and an offer has been accepted, a Notice of Proposed Action (NOPA) is mailed to all the heirs by the attorney, stating the terms of the proposed sale. The heirs then have 15 days to review the terms of the sale, and have the ability to “object” if they wish to do so. If the Administrator/Executor has Full Authority, and there are NO objections to the sale of the property, the sale may proceed without any court hearing. However, if the Administrator or Executor does NOT have Full Authority, OR, if there is an objection to the NOPA, the sale of the property must be published in a local newspaper, and a “confirmation hearing” must be set with the court by the attorney. During this time, potential buyers should still be encouraged to look at the property. The reason being, is because if there is another interested buyer, that buyer can show up to the confirmation hearing and over-bid the original accepted offer which raises the sales price of the property.
If the property needs court confirmation, an over-bidder may show up to the court hearing (with 10% of the minimum over-bid price in cashier checks) and over-bid the original accepted purchase price. The minimum over-bid price is as follows: 10% of the first $10,000, plus 5% of the balance of the accepted offer. EXAMPLE: a property has an ACCEPTED offer for $400,000. This is how you would calculate the minimum overbid price:
10% x $10,000= $1,000
5% x $390,000= $19,500
$20,500 + $400,000 (original accepted offer)= $420,500 is the MINIMUM OVERBID
*Depending on how many bidders there are, the judge can increase the bid increments
by whatever he wants ($2,000…. $5,000….etc.
The winning bidder would give their cashier check to the Executor/Admin/Attorney and
escrow would be opened.
VERY IMPORTANT!!! When you choose your escrow company, make sure the escrow officer has a solid understanding of the probate process. This will save everybody time, headaches, and money.
From this point forward it is pretty much pushing paperwork while the buyer prepares to fund the deal (because all of the negotiations and contingencies from the real estate side are done).
- There used to be an actual “Probate Listing Agreement”, however, now you just use the normal listing agreement and attache the “Probate Listing Addendum and Advisory”.
- The seller disclosures are all pretty much the same. The only thing different is the seller is “exempt” from filling out the Seller Transfer Disclosures.