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What exactly is a probate sale?

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POSTED November 15, 2013 6:53 p.m.

Boys: My husband and I have just made an offer to purchase a home and when we wrote the offer, we found out it must be approved by the court.  The Realtor used the word “probate.”  Our Realtor could not give a clear picture of what’s going on or what is going to happen.  Can you Real Estate Boys come to the rescue and explain what in the world we’ve gotten ourselves into with this purchase?

—Distressed Damsel

Dear Distressed Damsel , The Real Estate Boys, I believe, can help you mount the saddle and get the house going in the right direction. 

There are times when all the planning in the world does not go correctly.  In this case a gentleperson (man or woman, not matter) left this world without a will leaving directions where the house was to go.  Sell it or give it to Junior Miss or sell it and donate the proceeds to the Friends of the Public Library.  In this case it sounds like the persons who lived in the house died intestate — or without a last will and testament.  In cases like this the County of Stanislaus has a person called “the County Administrator.”  The Administrator will work with a Realtor to list this home and take offers and the Realtor will have so many days in which to accept offers.  On the given day the Realtor takes all the offers they have and meets with the Administrator and then accept what is perceived as the best offer for the estate. 

Distressed, here’s the process of a probate sale:  As we said above, a Realtor gets the listing and places it on the local Multiple Listing Service as a home for sale.  Realtors then show it and call the listing agent to learn more about what the estate will be requiring for a good faith deposit.  Many times the courts require 10 percent of the purchase price in the form of a cashier’s check.  The deposit alone tends to ward off a lot of buyers.  There is normally a set amount of days the home must be on the market before the offers are submitted to the Administrator’s office for review. The few estate sales I have been involved in require the buyers just to fill in blanks of a “Bid for Purchase of Real Property of Probate Estate.”  Then again, I have written buyers’ offers for estates on the normal Probate Purchase Agreement from the California Association of Realtors.  By all means, have your agent call the listing agent for the exact wants and needs before you waste a lot of time putting things on the wrong contract or the wrong amount of deposit.  So, when the Administrator reviews the offers, like bank owned properties, the main focus is highest net dollars to the estate.  In many cases, the buyers will be required to pay all of the closing costs.  That’s all of the title and escrow, transfer tax, natural hazard disclosure, etc.  The estate pays nothing.

OK, you’ve made your offer and you are chosen as the best bid or offer.  So, let’s close in a few weeks.  NOT!  Once the best bid has been accepted, the Administrator applies for a date to present your offer in front of a judge,  which normally is 15 to 30 days from the accepted bid.  On the court date we suggest you and your Realtor attend because when the Judge gets to your case and opens the file, he will ask if there is anyone one attending today that would like to over- bid or make an offer on this house. Again, if there is, he or she must have a cashier’s check in their possession for 10 percent of the purchase price to bid. If there is such a person, you and that person, or persons, must go up in front of the judge and the judge will set the ground rules as to the bidding process.   Ground rules, such as what the minimum bid increments will be. For example, to raise a bid it must be $1,000 more than the last bid or $4,000 more than the last bid.  So, you and the other person are up in front of the judge and all the rules have been explained, then the judge says to the new bidder, “Your first bid must start at $158,000,” for example, and he’ll ask are you willing to offer that price.  Yes or no?  “Yes!” says the new bidder.  Then the judge turns to you and says OK the next bid will be $162K and are you willing to pay that amount?  It will go back and forth until one of you says “no, I will not go any higher.”  At that point the judge makes sure that the person saying no understands that the home will go to the other bidder.  If that’s the case, the judge will say “sold.” 

When the gavel hits the judge’s desk you’ll be instructed to follow the Administrator into a room outside the courtroom.  Then you, the listing agent, and your agent will fill out the necessary paperwork to get an escrow open and your deposit will be receipted. 

Probate sales can be quick and easy.  There’s no fuss or personalities to deal with, the seller just wants to sell, close and get the money for the estate.  But, there are some cautions you as the buyer need to know before you jump in the cold water.  The seller will not pay any closing costs, such as half the title and escrow, there will be pest reports or inspections paid for by the seller.  You, as the buyer, can order a pest report and/or a whole house inspection prior to court hearing so you know if there are issues that you will deal with after the close.  Very few, if any, disclosures will be provided by the seller.  Lastly, the really big caution is that once the judge says sold and your cashier’s check is in the hands of the Administrator, that 10 percent deposit becomes non-refundable.  You’ll have a reasonable time to close escrow but beware that the 10 percent now belongs to the estate. Of course, it will be credited to your closing costs, but it will not be returned to you.  And as they gallop west towards the sun the Damsel in Distress asks who are those masked men?  Why, they are the Real Estate Boys.  Hioooooooooo Silver!

— A little about us, Lloyd is a retired farmer of 27 years and a realtor for about 10 years.  Lloyd is an active member of the Central Valley Association of Realtors and sits on the CVAR Board of Directors.  Lloyd is a long time member of CVAR’s Master Club for his sales production.   

Larry has been involved in Turlock real estate for 30 years and has been a broker for almost 27 years.  He is also active in CVAR activities and is a past president of CVAR.  If you have questions please call Lloyd at 531-4853 or Larry at 484-4216.  E-mail questions for future columns to: lrblackman@earthlink.net or lndrumbeck@aol.com.

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