Probate Sales Procedures

Not all probate listings involve deceased parties. Sometimes the owner is physically or mentally sick and unable to care for himself much less the property. This is called conservatorshipr or sometimes probate conservatorship.

If the probate sale is indepedent administrator GREAT...it's a regular sale.

If it's with court confirmation...more complicated...more players, more time involved.

10% of the purchase offer is required in a cashier's check. In some cases when there are no offers, the court may make an exception and go with less.

"Delivered to you herewith is a certified cashier's check in the sum of $_____________________, being a minimum of ten percent (10%) of the purchase price, balance to be paid within 30 days of court confirmation."

No contingencies. Buyer may do inspections, have someone appraise property, finance purchase...but purchase is not contingent on anything. First reason for this sale not being great for first time home buyers.

A County agency who hires me has a special purchase form where there is no room for contingencies as in standard Probate Purchase Agreement.

"I/we have inspected the property and the offer is made as a result of this inspection, and not on any representation based by the seller or any selling agent. I/we agree that you offer the property "AS IS" without representation, warranty, or covenant of any kind, express or implied."

Another agency uses the standard Purchase Probate Agreement.

Once the offer is accepted, buyer is committed to buying. The court is petitioned for a date for confirmation. Backing out threatens the loss of the deposit or part of it. At the very least the money will be tied up for months.

"This sale is subject to Probate Code section 10350(e). Should the purchaser fail to comply with the terms of the sale, the purchaser's deposit will be held by this agency subject to the court's determination of damages provided in Probate Code Section 10350 (e) which states: "If the property is resold, the defaulting purchaser is liable to the estate for damages equal to the sum of the following: (1) The difference between the contract price of the first sale and the amount paid by the purchaser at the resale. (2) Expenses made necessary by the purchaser's breach. (3) Other consequential damages."

Sometimes someone will show up in court to overbid, but it's unlikely...unless it is such a deal that it is worth bidding 5% over plus $500. Second reason to avoid having first time home buyers...they can't take the stress of bidding and potentially losing or over paying.

The judge will ask if there is anyone else interested in bidding. If no, original buyer gets the property. If someone else wants to bid, the ante goes up. Suppose the original winner was accepted at $200,000, the bid in court would be $210,500. And then the judge will have bids go up in increments of $5,000 (in my experience) so the original buyer would have to bid $215,500. If he says yes, the next bid is $220,500, and so on, and on, and on, until someone gives up.

As for agents, only the agent with court confirmation gets a commission. I usually have a division of commissions agreement signed by original broker/agent, broker B.

Agreement between brokers.

Wherein,
A = The estate (Seller). If the estate has a broker, that will be broker A.
B = The bidder (Buyer). If the bidder has a broker, that will be broker B.
C = The successful over-bidder (New Buyer). If C has a broker, that will be broker C.

If the bidder (B) is outbid in court by a new bidder (C), broker B will not get paid any commission.

Brokers A and C will split commission 50/50 per custom which will also include 50/50 on the overbid amount.

By the way, if a buyer shows up to bid without an agent, the listing agent takes all the commission.

Probate sales are good transactions, specially the independent administrator ones. Probate sales require a little more understanding as most agents and buyers are not familiar with them.