Buying a home can be a confusing process, but buying a probate property has its own special set of rules and even its own special purchase contract. Here’s a quick synopsis of the process and what you can expect.
The process of selling real estate through probate or trust is a court-regulated series of steps that must be carefully monitored and managed.
In addition to the court, the sale generally involves the Executor or Administrator of the estate, an attorney representing the estate, a real estate agent representing the seller (the estate), one or more buyers who place bids with the court, and those buyers’ real estate agents. Each of these individuals must follow the guidelines and deadlines of the court.
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:
1.) Appointment of the Administrator or Executor of the estate. If no Executor is named by the will or 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.
2) As provided in the Independent Administration of Estates Act (IAEA), the Executor establishes a list price based on a Probate Referee’s Appraisal and real etate agent opinion, and then the property is listed with a real estate agent or broker.
3.) The real estate agent markets the real property to the public and once a buyer is found, assists the seller in negotiating terms that are satisfactory to both buyer or seller. While some people believe that probate sales can be “deals,” the range offers is somewhat limited since an accepted offer must be 90% or more of the Probate Referee’s appraised value.
4.) 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.
5.) 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.
6.) During the court confirmation hearing, other buyers can attend and “overbid” the buyer whose offer has been accepted. The overbidding 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. The minimum overbid is determined by the following formula: 10% of the first $10,000 plus 5% of the balance of the accepted offer. If there is more than one overbidder, the highest bid ‘wins.’ The winning bidder gives their cashier’s check to the Executor/Administrator and escrow is opened. Escrow will close approximately 30 to 45 days from the court hearing.
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