Understanding Probate Real Estate
I wanted to blog today about a topic of real estate that not many agents venture into very often as it can be confusing. There is a lot of red tape seemingly all designed to impede the process. However the process of selling a home through probate is only a few extra steps that still allow a buyer to get a good deal. Probate lawyers handle much of the work dealing with the court. This article is designed to give the average person an idea of what a probate sale actually consists of should a relative of yours dies without a proper will or trust.
Most people with assets will have a living trust that discreetly assigns their assets to benefactors. There are others that have a will which names an Executor who assigns assets. When an individual dies and there is no Executor, or the assigned Executor doesn’t want to take on the burden, the court appoints an Administrator to carry out these duties. This procedure is done by a Letter of Testimony which gives someone the authority to act. This is usually a lawyer who, through the help of a real estate agent, will establish a price for the property needing to be sold. The court may appoint a Probate Referee to assist in valuing the property. The marketing and receiving of offers is the same as a regular sale with a few exceptions.
An accepted offer must be within 90% of the appraised value. At this point, the lawyer signs off on the offer and a Notice of Proposed Action is Mailed to all heirs, which states the terms of the sale. If there are no objections, the sale proceeds without a court hearing. Should there be an objection, a notice of the sale must be published in a local newspaper. The attorney for the estate will then apply for a court date which is 30-45 days out from the application date. It is at this point that a probate listing gives a real estate agent a “curveball.” Even after the court date is set, the home is to be marketed and advertised as available and able to accept offers in the hopes of securing an “over-bid” which raises the sales price with a higher priced offer.
During the court confirmation hearing, the originally accepted offer may be overbid by an interested party. That party must appear at the hearing with a cashier’s check in an amount totaling at least 10% of the minimum overbid price in order to successfully overbid. This is another area that can frustrate the real estate agent. The formula for this overbid is 10% of the first $ 10,000 plus 5% of the balance of the accepted offer. That number is then added on top of the accepted offer. An Example:
Accepted offer = $ 175,000
+.10 x $10,000 = $1,000
+.05 x $165,000 = $8,250
Minimum overbid = $184,250
X .10 = $ 18,425 amount of cashier’s check.
If there is more than one over bidder, the highest bid wins and gives his check to the Executor who opens Escrow. The transaction closes 30-45 days from the court hearing. I hope reading this, you realize Probate isn’t so bad; but as a buyer, you will have to worry about the overbid. In San Diego that doesn’t happen as often. Stop by and see your experienced Realty Executives/Dillon agent to learn more. Call Jason at 619-279-6311.