Probate Sales Explained

Perhaps one of the more confusing procedures in Probate Court is the court-confirmed sale of real property, more commonly known as a “probate sale.” Court confirmation of the sale of real property is required in nearly all conservatorship proceedings when real property is sold and is often required in decedent estate and Court-supervised Trust proceedings.  The purpose of court confirmation is to ensure that the best possible price is obtained.

When the sale of real property is necessary, the first step is to choose a real estate agent.  In conservatorship proceedings, the conservator must seek permission from the Court to sell the real property and to enter into an exclusive listing agreement. In most cases in a decedent’s estate the personal representative has authority to sell real property by virtue of his or her appointment, and does not need to obtain additional Court permission to sell. In the case of Court-supervised trust administration, the Order appointing the Trustee or bringing the matter under Court supervision will sometimes limit the power of sale otherwise set forth in the trust instrument. Once authority to sell has been granted by the Court, if necessary, the fiduciary lists the property for sale with the chosen real estate broker who markets the property. The listing agreement should be on the California Association of Realtors (“CARs”) Probate Listing Agreement.

After fully marketing the property, the listing broker typically will set a date to receive offers.  All offers to purchase a property subject to Court confirmation should be submitted on the CAR Probate Purchase Agreement and Joint Escrow Instructions form. The conservator, trustee or personal representative will review the bids with the real estate broker and frequently with his or her attorney too. Generally, all offers must be accompanied by a deposit of ten percent of the bid price. Sometimes the deposit check is given to the title company to open escrow on the sale, but frequently the listing agent requires that the deposit be made payable to the fiduciary to be held in the fiduciary’s conservatorship, trust or estate account.

After the sales contract is signed and all contingencies removed, the fiduciary’s attorney will prepare a petition to the Court to report and confirm the sale.  The petition to confirm sale  includes the details of the sale such as purchase price, the commissions for the real estate agents involved, and other necessary information.  The petition will also state the minimum overbid required for anyone else to bid on the property.  The first minimum overbid is calculated by adding 5% to the purchase price, plus $500.  For example, if a property is to be sold for $100,000, the minimum overbid is determined by adding 5% to the $100,000, or $5,000, plus $500.  In this example, the minimum overbid would be $105,500.

On the day of the confirmation hearing, the fiduciary’s attorney will appear in Probate Court, frequently with the real estate broker and the fiduciary.  The Judge will announce the bid price from the Bench and ask for any overbids, beginning with the first minimum over bid.  If no one bids, the Court will confirm the sale as reported to the Court.  Frequently, however, someone will step forward to offer the minimum overbid.  This triggers an auction in open court, with the Judge acting as auctioneer.  The bidding generally continues in increments of $5,000 or $10,000 until there are no further bids.  The sale is then confirmed to the winning bidder.  The winning bidder must be immediately prepared to give the fiduciary a cashier’s check for 10% of the bid price. There can be no contingencies on any offers made at the Court confirmation hearing. No new sales contract is required as the Court’s Order Confirming Sale sets forth the terms of the sale.  The title company will prepare the new deed and other papers to close the sale using the Court’s order as its instructions. The original bidder’s deposit is returned if successfully overbid.

— Larry Siracusa
— Steven Wright, Paralegal 

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