If you are a buyer, should you entertain putting an offer on a probate sale property?

Should you put an offer on a probate sale property?

Well, the first thing a buyer needs to understand about a “probate sale” of real property is that it is an estate administration which provides for the orderly distribution of real property owned by a decedent. More specifically, any property which the decedent owned or in which the decedent had an interest at the time of death is collected into the estate and distributed to those entitled to it after all debts and expenses have been paid. The process of administering a decedent‘s estate is referred to as “probate,” and is generally supervised by the probate court. A personal representative is the person or entity charged with the responsibility of administering a decedent’s estate (Cal. Prob. Code § 58(a)). A personal representative is either:

  • An executor (executrix) who is named in a will; or
  • An administrator (administratrix) who is appointed by the court when there is no will, when the will does not name an executor or when the named executor is unable or unwilling to serve.

The personal representative is charged with the fiduciary responsibility of gathering the assets and paying the debts of the decedent in such a way that the beneficiaries or heirs of the decedent receive the maximum inheritance. The personal representative usually will hire an estate attorney to handle the legal aspects of the probate. Most business dealings are through the estate attorney.

Estate property may be sold by the personal representative when:

  • The sale is necessary to pay debts, devises (gifts to persons named in the will), a family allowance, expenses of estate administration, or taxes;
  • The sale is to the advantage of the estate and in the best interests of the interested persons;
  • The property must be sold according to the terms of the will; or
  • Authority is given in the will to sell the property.

(Cal. Prob. Code § 10000.)A decedent’s will may designate the manner in which estate real property is to be sold or identify the particular property to be sold. Absent a court order based upon the best interests of the interested parties to the contrary, the personal representative shall comply with the decedent’s instructions. If the will is silent on these matters or there is no will, the personal representative may select the method of sale and the particular property to be sold. Estate real property may be sold by private sale, public auction, or a different method specified in the will of the decedent (Cal. Prob. Code §§ 10000.3, 10303). A private sale is one in which bids or offers are independently solicited, while a sale by public auction invites concurrent competitive bidding.

Buyer should understand the restrictions involved in a probate sale of real property.  The sales price of a private sale of estate real property subject to court confirmation must be at least 90 percent of its appraised value set within one year prior to the sale (Cal. Prob. Code § 10309).  All terms of a sale, including the minimum required deposit, are generally subject to court approval and local rules of court which vary from county to county. Generally, offers with contingencies of any sort (e.g., financing, sale of home) are not approved by the court.  This is just as good as saying your offer should be in all cash!  However, Sales of real property by the personal representative with full authority under the IAEA DO NOT HAVE THE SAME RESTRICTIONS and may contain all of the same contingencies and provisions as non-probate sales of real property (Cal. Prob. Code § 10503).

In summary, if you are a typical buyer (who needs a loan to purchase a property for instance), the type of probate sale you can safely be involved with is the one administered by an executor who is in full authority to sell the property without the involvement of court.

Salee Zawerbek, Your Personal Real Estate Consultant For LIFE!

SOURCE:  CAR
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