Everything You Need to Know About The Probate Process

If you’re an executor, administrator, a buyer or interested 3^rd party, you probably know of a property being sold under the probate code comes with another level of scrutiny. These properties can be sold with court confirmation for cash or through “Independent Administration” including terms and can be a good deal because of fewer qualified competitors and/or restricted showings, etc. However, probate sales may come additional risks of little or no disclosure, tenants or family in possession and in the case of court confirmation tie up your funds and require more time ending with a potentially heated auction overseen by the judge.  A Court confirmed sale typically requires the buyer to pay all transfer expenses including transfer tax, title insurance and escrow fees.

What is a Probate Sale?

A probate sale involves a deceased or incapacitated party, who cannot convey title.  The property is not covered by a will or estate plan and needs to be sold to care for the individaul or proceeds to be distributed to the beneficiaries.

Before the transaction is completed, an independent administrator or estate attorney will list and sell the property. After which, the sale proceeds will be distributed to cover health care or to the heirs after all the obligations and taxes are paid. That’s why this can be a lengthy process since the court oversees the sale, approves the transaction and delivers clear title.

When Is Probate Necessary?

Many are surprised to know that probate isn’t always required to transfer property. If a property is held in trust or as “Joint Tenants with right of survivorship” you may avoid probate.  In California if personal property is valued below $200k it can be passed on to heirs and beneficiaries without probate. However, if an estate exceeds such value, then the probate process likely kicks in to appoint someone willing and able to convey title.

How a Probate Process Works

Selling a property can be an overwhelming process; how much more difficult is a probate sale? Since California is among the many states that hasn’t adopted the Uniform Probate Code (UPC), each county court has its own detailed process about the requirements, its contents, date of filings and fees. Here’s an outline of the probate process in San Francisco County Superior Court:

1. Getting Started

You can only begin the probate process an application for a probate case # at Probate Window on the ground floor of 400 McAllister @ Polk across from City Hall.  Once you are appointed as the official Executor/Administrator your responsibilities include:

• Filing a petition for probate in the county in which the deceased person was living at the time of death. You will also present the death certificate and original will in the probate court.
• Publishing a notice of the probate in a local newspaper following court regulation and mailing notices to the deceased’s creditors.
• Providing notice to beneficiaries and heirs as per the court’s requirement.
• Submitting any necessary documents to the court.
• Plan on ordering an independent appraisal at the time of death to establish basis for tax purposes.

2. Administering the Estate

Assemble a team you trust.  After an executor is approved, the property under probate code gets appraised. For a court sale, the probate referee will establish value (usually a “driveby low value”) to make confirmation easier.  At this stage, it’s best to hire a real estate agent to list, confirm value, help with disclosures, market, and attract written offers. If your agent feels the referee’s pricing is materially flawed, (too high) you may petition the court for review to expedite the sale cycle.  However, before one can even execute a sale, they must again petition the court, who is responsible to protect the estate, for permission to sell the home when at least one buyer has put in a contingent free offer.

The deceased’s heirs and beneficiaries will be notified about the sale; it can only move forward with the court’s permission if no one files an objection. In cases when there’s more than one offer, all interested buyers should appear in court to submit their bids and be confirmed.

Like in regular auction bidding, the highest bidder wins the property and this process can become heated and quickly end so come prepared with a strategy and limits that work for you. The successful bidder ideally hands over a cashier’s check for at least 10% of the offer price to the estate’s executor or submit cashiered funds to escrow within 24 hours of the court order to purchase.

3. Closing the Estate

Once the creditors’ claim period has lapsed, debts are paid, and the executor has already filed all the necessary tax returns, it’s time to distribute the remaining sum of the sale to the beneficiaries. To do this, the executor has to:

• Send a notice to the estate’s heirs and beneficiaries that the final hearing is coming up—the period in which the notice must be sent is identified by the court.
• Get the court’s permission to distribute the proceeds of the sale.
• After distributing the assets and all matters involving the probate sale have concluded, file receipts and ask the court’s permission to release the executor from their duties.

Should You Buy a Probate Sale?

It isn’t for everyone, especially for someone looking for a quick, hassle-free move-in ready home. However, if you’re keen on getting good deals, it’s best to check out probate homes which have to be sold regardless of condition and economic circumstances.

Many properties sold through probate sell for lower than their market value. Just remember that the process takes longer with less disclosure. That’s why it’s important to determine your priorities before considering a probate sale.

Aside from that, you also have to consider the property’s condition—are there tenant issues, do you need to make any major repairs on the home?   Probate properties are marketed and sold “AS-IS” with 10% non-refundable deposit once confirmed.  Even with an inspection, you might not notice some issues that would cost thousands to repair. At the end of the day, it’s up to you to decide whether the benefits outweigh the risks of buying through a probate sale.

Call/Text Us Now!

Before deciding on your next step to list, sell or buy, you can take a moment and talk to Redmond Realty, one of the most trusted real estate brokers in San Francisco. Discuss your needs with Tom today.

To set an appointment, you can simply contact us. Through our confidential complimentary consultation, you can determine the best route for buying or selling your properties. Do you need more details and information? You can also call or text (415) 606-4484.