What are they? What Are the Consequences? And How to Avoid Them.
Back in our July 2019 journal entry, we introduced you to a few of the more common mistakes people make when selling probate real estate
. Those were bad enough. But they’re not the worst mistakes.
FOR REVIEW HERE WERE THE LAST MISTAKES:
- Thinking you can sell because you’re listed as an executor.
- Trying to do it yourself OR hiring inexperienced professionals.
- Leaving the house vacant for a long time.
- Overlooking necessary real estate disclosures.
What Mistakes are the WORST?
- Selling the property before probate.
- Distributing the proceeds of the sale before the dust has settled. (The proceeds go into the estate to be distributed.)
- Getting an appraisal of the property that is incorrect.
What Are the Consequences?
SELLING THE PROPERTY BEFORE PROBATE
In a nutshell, you have broken the law. There’s an intricate process to follow according to California law. You may face lawsuits because an unsuspecting buyer will find they have no right to the property. After all, you had no right to sell it. They’re upset. It will depend on the amount of lost money and how much damage it has cost the buyer. It may get very expensive.
DISTRIBUTING THE PROCEEDS OF THE SALE BEFORE THE DUST HAS SETTLED
The proceeds should go into the estate to be distributed. Although it would be somewhat difficult to obtain the funds from the sale, you may think somehow that the money is yours. It’s not. You’ve again broken the law, and the result would be fines and lawsuits.
What’s interesting is that your family may be happy to have the raw proceeds of the sale. However, there are most probably expenses against the sale that have to be sorted out, which is why the proceeds by law must go into the estate. When the family finds out they are not getting as much (or any) money, they’re upset. So, you may face lawsuits from your own family. Yes, they can sue you.
GETTING AN APPRAISAL OF THE PROPERTY THAT IS INCORRECT
If the appraisal is too high, no one will buy the house. You’re stuck maintaining it. When you run out of money, the home falls in disrepair. Your brother and sister do not want to take a lower offer.
The house sits. You drop more money into it (especially if it is not selling, and you have to maintain it to make it look presentable and keep up with property taxes). When the house finally sells (after paying for a re-appraisal, maybe) and there’s not enough equity to cover the cost of the repairs, everyone is unhappy. They sue.
How to Avoid These Mistakes
We hate to say it, but all of these mistakes can be prevented.
Do your homework, and have people that are trained in probate real estate help you. Make sure you have a probate realtor on your team because, as you have seen here, there are differences between probate real estate transactions and regular deals. Be sure to interview each of the experts whether they’re lawyers, probate real estate agents, or contractors who will be repairing your house. Look at related blogs on this issue. Even the best sounding probate realtor needs to be vetted.
Probate real estate in Orange County may have slight differences from probate real estate in Los Angeles County. Research and get referrals in each area. We’re well-versed in both counties, but other probate real estate agents might not be as well-informed.
Put your property in a trust in the first place. If the real estate is in a valid California trust, probate can be avoided. Don’t try to skip steps. Don’t get impatient. Even with the best probate lawyers, the finest probate real estate people, and the best, most robust economy in decades, stuff happens. Don’t jump the gun, don’t take the money from the sale, don’t let the house sit too long. (Yes, we’re repeating ourselves, because it is important).
And if you haven’t already, check out our previous post on mistakes in selling probate real estate.
Selling probate real estate is not a simple task. The California courts have strict laws on the sale of probate real estate for a good reason. Let’s face it; people have tried to sneak property out from under their family’s noses since King Henry VIII attempted to sell his parent’s castle in 1547 without his brothers and sisters finding out about it. Also, King Henry VII (Henry VIII’s dad) didn’t have family trusts back then. Plus, they didn’t have great probate real estate agents. Or inside plumbing.
Do it right. Hire professionals. And don’t lose your patience. Don’t skip probate, and please do not distribute the money yourself before the proceeds have gone back into the estate. Don’t risk being sued (even by your own family) or going to jail. That’s a waste of time, and jail food is terrible.
If you have questions, please contact us Here. We can help you avoid these mistakes!
DISCLAIMER: This content is meant purely for educational purposes. It contains only general information about real estate and/or legal matters. It is NOT legal advice and should not be treated as such. We recommend consulting a legal or tax professional before acting on any advice, opinion, or point of view described herein.