Let’s face it, there is a “graying” of the Palos Verdes Peninsula and not to be morbid, but part of the increasing percentage of seniors on the Peninsula means an increasing possibility that many of the homes sold will be Palos Verdes Probate Property.
Take a look at the process of a court mandated probate and you will be sure to get busy and get your property in some sort of a Living Family Trust. If you’re a buyer of a Palos Verdes probate property, you’ve got to be strategically thinking and planning if it’s a type of probate in which the court must approve the sale. Because there is a strict formula on how much above the tentatively accepted offer must be in order to overbid and win the property, as a buyer of a Palos Verdes probate property, you must offer high enough so that the next step up in the formula places the property’s price at a level that most likely will be perceived by competitive buyers as to high to bid. The formula is at the end of the italicized portion of this post. How do you determine what that price is? That’s going to happen with your careful and meticulous consult with your Realtor.
The process of selling real estate (real property) through probate or trust is a series of court-regulated steps that must be carefully monitored and managed. Deadlines are unforgiving, documentation is specialized and the court’s oversight must be honored throughout the marketing, offers, negotiations and sale of the property.
In addition to the personnel of the court, the sale generally involves the Executor or Administrator of the estate, the attorney representing the estate, a real estate agent representing the seller (the estate), one or more buyers who place bids with the court and the buyers’ real estate agents. Each of these individuals must follow the guidelines and deadlines of the court.
Because of the involvement of the court, probate and trust sales have a vocabulary all their own (see glossary). They also involve various disclosure documents and contracts that are not used in other real estate transactions.
If you are selling or buying real property through such a transaction, your real estate agent should be experienced in probate and trust sales and be able to explain the language, the documentation and the steps in the process. Clear communications are vital.
To help you understand the probate and trust sale process, here is a list of some of the steps involved in a typical transaction:
Appointment of the Administrator or Executor of the estate. In most cases, the decedent’s will names an Executor who is designated to handle the distribution of assets, including real property. If no Executor is named, if the named Executor is unwilling to serve or if there is no will, the court appoints an Administrator to carry out these duties. The Executor or Administrator is the person who has the authority to list and sell the property; the sale cannot proceed until that person has been identified.
As provided in the Independent Administration of Estates Act (IAEA), the Executor establishes a list price for the real property. The price takes into account the appraisal by the Probate Referee and is usually determined with the assistance of a real estate agent experienced in probate and trust sales. The property is then listed for sale through that agent/broker.
The real estate agent markets the real property to the public as aggressively as possible to attract the highest offer. This generally involves a number of approaches, including signage, newspaper advertising, listing on one or more real estate websites and hosting open houses for other real estate agents and potential homebuyers. The real estate agent will also schedule appointments to show the property to interested parties who inquire directly.
While buyers of probate and trust real estate may be looking for a bargain, their range of offers are limited by the court. An accepted offer must be 90% or more of the Probate Referee’s appraised value. Once a buyer is found, the real estate agent assists the seller in negotiating terms that are satisfactory to both parties.
When the property has an accepted offer, a Notice of Proposed Action is mailed to all heirs, simply stating the terms of the proposed sale. The heirs have 15 days to review the notice and pose any objections. If there are no objections, the sale may proceed without a court hearing.
If the Executor/Administrator does not have full independent powers under IAEA, or if one of the heirs poses an objection to the Notice of Proposed Action, notice of the sale must be published in a generally distributed local newspaper (unless the will does not mandate such action).
The attorney for the estate then applies for a court date (the “confirmation hearing”) when the sale will be executed. The court date is usually within 30 to 45 days of the date the application is filed. A copy of the application and details concerning the sale are mailed to all interested parties.
Even after the court date has been set, the real estate broker should continue to show the property and advertise the home to potential buyers in the hope of securing an “over-bidder” and thereby raising the sale price.
During the court confirmation hearing, the previously accepted bid may be overbid by another interested party. In such a case, the overbidding party must appear at the hearing with a cashier’s check (no personal checks accepted!) in an amount totaling at least 10% of the minimum overbid price in order to successfully overbid. The minimum overbid is determined by the following formula: 10% of the first $10,000 plus 5% of the balance of the accepted offer.
EXAMPLE: A property is listed at $200,000. The accepted offer is $175,000.
The minimum overbid is calculated as follows:
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 overbidder, the highest bid ‘wins.’ The winning bidder gives a cashier’s check to the Executor/Administrator and escrow is opened. Escrow will close approximately 30 to 45 days from the court hearing.
Palos Verdes Probate Property Flow Chart
above information is from The Sanborn Team and Nancy Sanborn who can be contacted at (310) 777-2858 www.sanbornteam.com
CALIFORNIA PROBATE TIMELINE
- File the “Probate Petition” at the courthouse (1st to 2nd month)
- Notice of the first court hearing date published in the newspaper of general
circulation in the decedent’s resident city and notice mailed to all heirs and named
beneficiaries (Immediately after filing of the Probate Petition)
- First court hearing date is held (approximately 5 weeks after filing the Probate Petition)
- Issued Bond — if ordered by the judge (2nd to 3rd month)
- “Letters” & “Order” appointing the Personal Representative are issued (2nd to 3rd month)
- Personal Representative opens an estate’s bank account with the estate’s EIN tax identification
- Personal Representative gathers all assets and inventories for safe keeping (0 to 3rd month)
- “Notice to Creditors” form sent to all reasonably known creditors and the applicable
government agencies (2nd to 4th month)
- Real estate properties are sold (3rd to 4th month if Full Authority is granted under the IAEA) >>>Full Authority>>>>>>Notice of Proposed Action>>>>Closed Escrow
- “Inventory & Appraisal” form filed with the court (4th to 6th month) — After the probate referee has been appointed/assigned by the court
- Selling Property under >>>Limited Authority >>>Must Sell for at least 90% value of the Inventory & Appraisal Form>> Court Confirmation >>>Close Escrow
- “Change in Ownership Statement Death of Real Property Owner” Form filed with the County Recorder (4th to 6th)
- “Claim for Reassessment Exclusion for Transfer between Parent and Child” Form filed with the County Recorder (4th to 6th) — Proposition 58. Proposition 193 Grandparent to Grandchildren
- Debts are paid (4th to 6th)
- Taxes paid (6th to 12th month)
- Petition for Distribution is filed (8th to 12th month)
- Second court hearing date for distributon (9th to 12th month)
- Order signed by the judge allowing distribution to heirs (9th to 12th month)
- Distribution to heirs/beneficiaries (9th to 12th month)
- Receipt on Distribution from the Heirs that they received the money distribution (10th to 12th month)
- Ex Parte Petition for Final Distribution and Order sign by the judge (10th to 12th month)
- Case closed (10th to 12th month)
Get the latest real estate trends from Manhattan Beach homes south through the Palos Verdes homes markets
Deep demographics on the individual multiple listing service areas, not just zip codes but rather specific zip codes
Take a moment to write a review of George Fotion on Yelp