The process for selling California real estate owned by a trust has several differences compared to standard residential property sales. Sometimes, trustees have leeway to conduct a sale on behalf of a trust with processes similar to what they might use to sell their own home. For more complex trusts, trusts with multiple trustees, or situations when beneficiaries are more closely involved in observance of trust activities, trustees may find themselves subject to a considerable amount of legal and procedural red tape. Developing the administrative constraints of a trust sale is the purview of experienced trust attorneys employed by the trustee. For our discussion here, we’ll focus on just what a real estate broker will do differently when selling California real estate owned by a trust compared to a standard home sale.
Once a trustee has gone through the legal preparations to sell a property and has selected a broker, the noticeable changes compared to a standard sale begin with the listing contract. As indicated in the table below, we’ll use the Trust Listing Agreement instead of the standard Residential Listing Agreement. We’ll also complete a Trust Advisory that will be signed by the trustee and the broker.
The Trust Advisory explains the statutory exemptions that apply to trust sales that don’t apply to standard sales. These exemptions may include that the seller is not required to provide a Real Estate Transfer Disclosure Statement or a Mello-Roos district lien disclosure. In general, however, the trustee is required to disclose much of the same information about the property that any other seller would need to provide, although the forms used may vary.
Also shown in the table, potential buyers may use the standard Residential Purchase Agreement form to submit their offers. In some instances, buyers will also submit a Court Confirmation Addendum with their offer. If administration of the trust requires that a sale of assets must be cleared through a court, the trustee should disclose in Section 17 of the Trust Listing Agreement that court approval will be required before an offer can be accepted. When this is the case, buyers may use the Court Confirmation Addendum to set a deadline for expiration of their offer if court approval is not obtained by a certain date. Buyers will submit another Trust Advisory form with their offer to acknowledge the disclosure limitations applicable to trust sales, plus a Trust Signature Addendum that confirms the authority of the trustee to sign sales documents as a representative of the trust.
These are the primary form differences between a trust sale and a standard sale. Brokers who specialize in trust sales work with their seller to create a marketing plan and negotiating strategy that is tailored to the trust environment. These strategies must take into account local market conditions, the features and condition of the property, and the administrative process requirements established by the trustee and attorneys representing the trust. In other words, the forms are just the starting point for selling California real estate owned by a trust.
Although not discussed here, it’s important to note that land and commercial sales involving trust properties share many of the same administrative and disclosure requirements as homes. Land, commercial and residential properties held in trust are also sometimes subject to probate proceedings when a sole trustee has passed. For more information on probate sales, read my article Selling California Real Estate Owned By Estates In Probate or visit my web page that describes our related services for real estate in probate or trust.
If you have any questions about selling California real estate owned by a trust, please send me a note.
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John A. Souerbry & Associates (DRE 01370983)
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