A probate property sale refers to the sale of real property—a residence and the land on which it sits—after a property owner (the decedent) passes away without leaving a trust or clear beneficiary. Under the probate court's supervision, an administrator or executor (the personal representative) is named to oversee the sales process. While not the most streamlined method for securing new real estate, buying probate property can be advantageous for various reasons.
In some cases, it allows for purchasing a property below market value. Probate properties may also generate only limited interest due to the "as-is" condition of the homes or the niche aspect of the probate real estate market, which can mean fewer competing buyers.
The probate purchase process, however, is unique and governed by specific rules, which can be unfamiliar to those accustomed to more traditional real estate acquisitions. Here are some essential tips when buying probate trust property in California.
Identifying probate property sales
While many of these properties are sold via traditional means—listed through a real estate brokerage—you can also acquire probate property through private sales involving a confidential bid process or via public or private auctions.
For the most comprehensive listings of available probate property, speak with a brokerage specializing in probate real estate.
The difference between a full authority and a limited authority sale
Familiarizing yourself with the finer points of California's probate property laws while seeking out a trusted real estate partner specializing in the niche probate market can help you confidently approach the buying process.
Recognize what you're buying
Limits of California's disclosure laws
- Transfer Disclosure Statement
- Seller's Property Questionnaire
- Earthquake Hazard Booklet and
- Earthquake Hazard Questionnaire
- Natural Hazard Disclosure
- Smoke Detector Compliance
- Lead-Based Disclosure
- Database Disclosure (Megan's Law)
- Water Heater Disclosure
- Knowledge of property issues or concerns of which the personal representative is aware
No guarantees of property condition
As an appointed role overseeing a decedent's estate, the personal representative may or may not be related to the previous owner (or have any prior affiliation). Even if they are a relative, there's no guarantee they would possess an intimate enough knowledge of the property to accurately convey any potential issues.
Nor are they under any expectation to do so. Again, while in their best interest to convey as much information as possible, the "as-is" clause in the purchase agreement alleviates
Of course, as a potential buyer, you retain the right to inspect the home should your offer be accepted. But due to a California requirement that prohibits probate properties from being sold at less than 90% of their appraised value in a limited authority sale, you'll want to plan how you approach any shortcomings within the property.
The personal representative is under no obligation to fix any significant concerns. However, you can still negotiate for reasonable repairs, including a request to address minor issues or seek a price reduction. You can also walk away from the transaction entirely if any aspect of the process proves unsatisfactory.
Understanding the overbid process
The overbid process and calculation
After an offer is accepted and the court approves, the latter sets the minimum overbid number based on a formula outlined in California's probate code—a minimum of 10% more on the first $10,000 of the original bid, plus 5% of the original bid less $10,000. To put that in real terms:
- Assume a probate property lists for $725,000.
- The accepted offer is $700,000.
- A minimum of 10% on the first $10,000 equals $1,000 (.10 x $10,000).
- 5% of the sale price less than $10,000 equals $34,500 (.05 x $690,000).
- $700,000 plus $1,000 plus $34,500 equals $735,500 minimum overbid price.
If you're overbidding for a property
If yours is the original offer
Much like regular real estate, desirable probate properties in desirable areas will attract their share of interested parties. If you're set on buying a specific probate property, be prepared to bid and pay more than your original offer.
Connect with a trusted team of experts
As a seasoned probate real estate broker, allow their knowledge and experience to help you navigate the unique purchase process. With expertise in probate, conservatorships, trusts, bankruptcy, and receiverships, and hundreds of satisfied clients, The CREM Group's proven track record of success in dealing with these hyper-specific transactions in the real estate markets of Los Angeles, Orange County, and the surrounding areas will ensure your probate experience is highly successful.