Buying California Real Estate Sold By An Estate In Probate or Trust

If you’re considering buying California real estate sold by an estate in probate or trust, or you are a broker or agent working with such a buyer, this article will provide a few helpful tips that could increase your success when bidding on these properties.  In previous articles (see links below) I shared my experiences brokering real estate held in probate or trust for many different types of properties, including condos, single family homes, rental properties, apartment buildings, and even a small parcel of urban land that sold for over $15M.  For the most part my previous articles shared what to expect from the seller’s side, today we’ll discuss the buyer’s point of view when buying California real estate sold by an estate in probate or trust.

Before we discuss buying tips, we need to consider two very important factors in the sale of probate or trust property.  First and most important – sale of probate or trust property often follows the passing of the owner.  When that is the situation, the mourning family absolutely should not be contacted regarding potential sale of property.  As a broker who also provides other services helpful to families in these situations, I’m often brought in soon after the owner’s passing for other purposes.  I’m greatly embarrassed when a family member, now executor of a loved one’s estate, plays for me dozens of messages left on their answering machine by real estate agents soliciting listings or investors wanting to buy property before it goes on the open market.  This, in my opinion, is completely inappropriate.  Instead, contact the estate’s attorney or the listing broker once the broker has been hired.

A second factor to consider is that the deceased’s will or trust may direct distribution of real estate to a specific party through the estate distribution process or will give someone (usually a friend, relative or business associate) first right of refusal to purchase a property before it goes on the open market.  These properties will usually never make it to the open market and the family should be left to handle distribution without being harassed by outsiders.

Ok, so let’s say the executor or trustee and everyone else involved agrees to sell some properties.  Here are five tips to help you successfully acquire estate or trust properties.

Tip #1: Understand The Sale Process Specific To The Property.  Some probate and trust sales require court confirmation, written approval by the beneficiaries, and other unique process requirements.  For others, the executor or trustee might have sole authority to conduct the sale and will use the same sales process they’d use for selling their own home.  Strategy: Before making an offer, ask the listing broker how offers will be submitted, reviewed and analyzed for acceptance.  Ask what the most critical selection criteria will be.  Also ask if there will be any special escrow processes or time constraints/restraints.

Tip #2: Don’t Expect An Off-Market Sale.  Executors and trustees are generally bound to solicit as many competitive offers as possible and listing the property on the MLS or other public market (e.g. LoopNet for commercial) is usually a requirement.  I receive literally dozens of calls every year from investors wanting to put offers on properties before they hit the market – and none of these offers have ever been at or above market value.  Executors and trustees won’t even respond to these offers until they’ve tested the market first.  Strategy: Depending on the property, be prepared to compete with other bidders.

Tip #3: Don’t Expect A Discount.  As stated in Tip #2, executors and trustees have a financial responsibility to manage assets wisely, including getting maximum prices for anything they sell.  If the property needs clean-up and repair, the estate or trust will usually refurbish it as long as they can recoup their investment.  However… there are two common situations when a discount might be considered: 1) when the estate doesn’t have enough cash to repair the property to market standards and will have to adjust the price or give credits to get it sold and 2) when the estate or trust has little or no cash for ongoing expenses and will consider a discounted offer that guarantees cash by a specific deadline.  Strategy: Be prepared to submit offers that reflect market conditions or support discounts with specific explanations for them.  But, if the estate or trust needs cash fast, submit a creative offer that might contain multiple deposits, non-refundable pass-through deposits, or other features that help the estate remain solvent during escrow (implement a “white knight” business strategy).

Tip #4: Expect A Longer Review Period On Your Offer.  Although many executors and trustees have sole authority to conduct property sales on behalf of the estate or trust, they seldom do without consultation with others.  More commonly, “beneficiaries” (those who will have the assets passed to them at close of probate or at some time in the future) will want to review and/or approve any sales of significant assets – especially real estate.  Whether done per a legal requirement or as an accommodation meant to keep peace in the family, beneficiaries and their attorneys will usually review all real estate sales prior to putting the property on the market and before the executor or trustee accepts an offer.  These reviews are sometimes completed within a few days, but they often take several weeks if the people doing the reviewing live out of town, are on vacation, or are otherwise temporarily unavailable.  Strategy:  If the estate’s broker doesn’t tell you how long your offer needs to be valid, ask (per Tip #1).

Tip #5: “As-Is” Is A Variable Absolute.  As mentioned in my previous articles relating to probate and trust sales, executors and trustees are exempt from providing certain disclosures.  In California, all probate property sales are considered “as-is” transactions, but that doesn’t relieve the seller from disclosing issues with the property about which they have personal knowledge.  The executor or trustee (“seller”) might have never seen the property and therefore wouldn’t know firsthand if there is a microwave in the kitchen or if the lawn sprinklers work, but they should be expected to know – and disclose – if there is any litigation pending that involves the property or if the owner passed away on the property during the required disclosure period (I realize this requirement varies from state to state).  Strategy: Don’t expect the seller to provide inspection reports and disclosures not required for these types of sales.  Budget for a full set of property inspections.

Buying California real estate owned by an estate in probate or trust is usually a smooth procedure if you know up-front what to expect.  Please be respectful to the family and work within the procedures required by the executor or trustee.  Please comment or submit questions.

Note:  This is not a legal review of probate administration procedures and no legal opinion is offered.  Always consult with a qualified attorney for advice on probate and trust administration.

Related articles:

  Selling California Real Estate Owned By A Trust

  Selling California Real Estate Owned By Estates In Probate

  Three Common Mistakes When Selling California Real Estate Owned By A Trust

More about our probate and trust property services:

  Services For Real Estate In Probate Or Trust.

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John A. Souerbry & Associates (CalBRE 01370983)