Probate real estate transactions follow regulated steps that must be carefully monitored and managed. Deadlines and terms are not negotiable.
In addition to the court personnel, a probate sale will involve the Executor of the estate, the attorney representing the estate, a real estate agent representing the estate, one or more buyers placing bids with the court, and the buyers real estate agent. All parties must follow the strict guidelines and deadlines of the court.
Probate sales involve various disclosure documents and contracts not used in other types of real estate transactions. Your real estate agent should be experienced in probate sales and be able to explain to you the language, documents, and steps in the probate process.
Here are some steps involved in a typical probate real estate transaction:
Appointment of the Administrator or Executor of the estate
Typically, the deceased will appoint an Executor to handle the distribution of their assets, including any real estate property. If no Executor is named, or the Executor named is unwilling to serve, or if there is no will, the court will appoint an Administrator to carry out these duties. The Executor or Administrator has the authority to list and sell the property. The sale cannot proceed until this person has been identified.
The Executor establishes a list price for the property
As provided in the Independent Administration of Estates Act (IAEA), the Executor will set the listing price. The listing price takes into account the appraisal by the Probate Referee and is typically determined with the assistance of a real estate agent experienced in probate transactions. The property is listed for sale through that agent or broker.
The real estate agent markets the property
The real estate agent will aggressively market the property to the public through a number of approaches. They are trying to get the highest bid so they will use signs, advertising, listing on real estate websites, and hosing open houses for agents and potential buyers. The real estate agent will also schedule appointments to show the property to interested parties.
Bids are placed and an offer is accepted
The range of prices that a buyer can offer is 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 will assist the seller in negotiating terms that both parties will agree upon.
Notice of Proposed Action
Once an offer is accepted for the property, a Notice of Proposed Action is mailed to all heirs and will state the terms of the proposed sale. The heirs will have 15 days to review the notice and state any objections. If there are no objections, the sale may proceed without a court hearing. If the Executor or Administrator does not have full independent powers under IAEA, or any of the heirs proposes an objection to the Notice of Proposed Action, a notice of the sale must be placed into a generally distributed local newspaper.
The attorney for the estate will apply for a court date, or “confirmation hearing”, where the sale will be executed. The court date will typically be within 30-45 days of the date that the application was filed. A copy of the application and details concerning the sale will be mailed to all interested parties. Even after the court date is set, the real estate broker will continue to show and advertise the property to potential buyers to attempt to secure an “over-bidder”.
During the court confirmation hearing, the previously accepted bid may be overbid by another interested party. The overbidding party must appear at the hearing with a cashier check for at least 10% of the minimum over bid price in order to successfully overbid. If there is more than one overbidder, the highest bid wins. The winning bidder will give the cashier check to the Executor/Administrator and escrow will open. Escrow will close approximately 30 to 45 days after the court hearing.