Posted almost 3 years ago. Applies to California, 1 helpful vote
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At least once a week I get a call from a perspective client that goes something like this:
ME: "Good morning this is John Palley...."
CLIENT: "I need your help fast... we are trying to sell mom's house... it might be in foreclosure... and the mortgage company won't talk to me since we haven't started the probate yet...."
ME: "How long ago did mom die?"
CLIENT: "Well... she died 3 years ago but I have been busy, and my brother isn't helping out, and then I got divorced, and my dog is sick, and...."
ME: "I want to help you out... and I CAN help you out...."
However, in most of these cases the only way I can help is by filing for probate. The probate process, though not the end of the world, is slow. If the client above contacted me on May 18th I would most likely get "Letters" issued to them by the probate Court around July 1st. In some cases, if it's an emergency, we can get Letters issued earlier via an "ex parte" petition to the Court.
Ok, so once Letters are issued by the probate Court then what happens? Well, Letters allows you to stand in the decedent's shoes. That is, you make all decisions for them as if you were them... but there are some extra rules involved.
So we file the probate May 18th, you are appointed Administrator on July 1st and then what.... Well, generally we want to get the house sold as quick as possible... especially in this down real estate market. I encourage my clients to prepare the house for sale, interview Realtors, look at market analysis reports from the Realtors, and do whatever else they reasonably can so that the listing agreement can be signed on July 1st.
Once the listing agreement is signed you can start accepting offers! Well, maybe the offers don't roll in like they did back in 2004 or 2005 but if a house is priced right it will sell!
Once you have an accepted offer you (or more likely your Realtor) will provide that contract to me. In most cases Court approval is NOT needed. Instead I will send then out the Notice of Proposed Action to all interested parties. That provides them 15 days to object if they do not think the sale is fair. People do not generally object but if they do it's likely because they feel the house has been sold too cheaply. If nobody objects the house can close escrow 15 days after the Notice of Proposed Action was sent out.
If a person objects then we revert to a Court auction. Unfortunately this greatly delays the sales process as we have to publish in the paper, post at the Courthouse, and send notice to all interested parties. The Court hearing will look a lot like a cattle auction down at the county fairgrounds.
The Judge will generally have a number of probate matters on his calendar. Anywhere from 5 to 85 depending on what county. Let's pretend this case is first. The Judge would call the case and then the Judge (or the attorney) would announce the sale as follows:
"Calling the estate of John Doe, case number p5319, this is a petition to confirm sale of the real property located at 1234 Main Street." The Judge would then say "the bid is $200,000 and if anybody here today wants to bid the first overbid will be $220,000. Does anybody want to buy the property at 1234 Main Street for $220,000? Going once, going twice... hearing no offers the house at 1234 Main Street is confirmed to Bob Smith for $200,000...."
The Judge will likely sign the order right there and an organized and efficient attorney (like me) will pick up the order and get it to the title company that same day so that the sale can close escrow ASAP!
The above illustrates the two most common ways to sell a house in probate. The first is by Notice of Proposed Action and the second is by Court auction. There are other situations that arise. Here are a couple we deal with:
First is the situation where one family member wants to buy out the other family members. This can be done but care needs to be taken with the transaction. There are many problems that could develop. A common problem is a child is buying the house but the attorney has not properly established a distribution agreement to maximize the chances of the parent to child property tax exemption form being accepted by the county assessor. This is crucial as a re-assessment of property taxes can create a huge, and very long term, tax impact for the person who is keeping the house.
In this type of family transaction it is also is crucial to get the house valued properly so all interested parties agree the price is fair. This can be done by agreement, valuations by one appraiser, valuations by multiple appraisers, or some other means. Though the probate referee has to appraise the house their appraisal is the date of death value which is not always relevant as so often it has been many months since the decedent's death.
Another situation we have been seeing more and more is probating upside-down real estate. There are cases where we can get YOU money even if an upside-down house is the only asset in the probate case. Yes, really! Call me to discuss!